Doctors are often asked to sign restrictive covenants when they begin their employment. Generally speaking, a valid restrictive covenant prohibits the doctor from soliciting or treating certain patients for a certain period of time after the doctor’s employment is terminated. The purpose of such a covenant to to prevent the doctor from competing with his former employer, at least for a while. However, restrictive covenants are not always enforceable in court.
On April 15, 2013, the Illinois Appellate Court (1st District) ruled that plaintiff Gastroenterology Consultants of the North Shore, S.C. (“GC”) could not enforce its restrictive covenant against one of its employed physicians, Dr. Mick S. Meiselman.
Dr. Meiselman had a contract with GC that prohibited him from soliciting or treating patients of GC within a 15-mile radius of GC’s office for a period of 36 months following the termination of his employment. However, a few months after the termination of his employment, Dr. Meiselman was treating patients that he had treated while working for GC.
According to the Appellate Court, a restrictive covenant is only enforceable if it (1) is no more restrictive than is required for the protection of a legitimate business interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public. The Appellate Court found that GC’s restrictive covenant was not enforceable against Dr. Meiselman because GC had no legitimate business interest in need of protection. Therefore, GC’s covenant failed the first prong of the three prong test.
In reaching this decision, the Court considered the following factors. Prior to GC’s formation, Dr. Meiselman practiced gastroenterology for approximately 10 years in the area later serviced by GC, treating thousands of patients. Dr. Meiselman then joined GC, but continued treating his patients and accepted referrals from physicians with whom he had developed relationships prior to affiliating with GC. After joining GC, Dr. Meiselman preserved his independent relationship with his patients. Doctors would refer patients to Dr. Meiselman individually, not to GC. GC did not advertise, promote or market Dr. Meiselman’s practice. Dr. Meiselman, not GC, billed for his services. Dr. Meiselman’s compensation was based on revenue generated by his independent practice. And Dr. Meiselman maintained his own office and telephone number.
In sum, GC could not claim that it had a legitimate business interest in preventing Dr. Meiselman from continuing to treat his patients, and therefore, the restrictive covenant was unenforceable. Click here to read the Appellate Court’s full opinion.
The attorneys at DeBlasio & Donnell LLC have advised clients on covenants not to compete, business litigation and employment litigation matters. To schedule an appointment to speak with one of our attorneys, call us Toll Free at (877) 646-9245 or contact us via our website at http://dd-lawfirm.com/contact.php.
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