3 Things to Know About Non-Compete Clauses

Considering the nationwide shortage of mental health providers, the agencies and companies that employ therapists are increasingly competing to recruit and retain those therapists. To do this, some employers insert “non-compete” clauses into their employment contracts in hopes that this will keep employees from jumping ship. 

The intention is to protect employers from investing in training an employee, only to have the employee quit and make use of that training with a competing business. These non-compete clauses work in various ways to restrict the therapist’s future employment or practice after they have left the original employer. 

What to Know About Non-Compete Clauses

Here are three things to know about non-compete clauses in employment contracts for mental health professionals, and how they may impact you.

1. There are different kinds of non-compete clauses.
It’s common for non-compete clauses to say that, while you are working for the employer, you cannot also be working for a competing employer. (That would include your own private practice.) But beyond that, not every non-compete clause works the same way. 

Some say that if the employee leaves, they can’t go to work for a competing employer within a certain physical distance. Others don’t restrict where the employee might work next, but instead seek to restrict who the therapist can serve in their next job. These clauses might prohibit the therapist from seeing any client who had previously been seen at the original employer, or from marketing to the audience served by the original employer. 

Alternatively, non-compete clauses might require that the therapist pay the original employer a certain fee or a percentage of fees from clients who the therapist had seen at the original employer and then continued to see at their new workplace. Therapists may be well-served to be particularly cautious about this kind of requirement, as it could be seen as paying a fee for referrals, which is prohibited by professional codes of ethics and by many states’ laws.

Regardless of which type of non-compete clause the employer uses, they are typically time-limited, with terms ranging from a few months to several years.

Note that non-compete clauses are different from non-solicitation and non-disclosure clauses. Non-solicitation clauses typically prohibit you from marketing your services to the employer’s customers or contacts. Non-disclosure clauses typically prohibit you from sharing or otherwise making use of any trade secrets, or other confidential information you learned during your employment, in any competing workplace. Each of these kinds of clauses also may extend for a specified period of months or years after your employment ends.

2. Enforceability of non-compete clauses varies.
According to law corporation Perkins Asbill, “Courts in most states will generally enforce a non-compete so long as it is reasonably limited in its subject-matter, geographic scope, and duration, and provided it serves a legitimate business purpose.” 

In other words, the longer a non-compete clause lasts, the more activities it restricts, and the less clear its reasons, the harder it will be for an employer to enforce it in court. But the default positions many state courts will take is to enforce non-compete clauses that the employee actively agreed to.

However, California is an outlier on this compared to other states. California law on non-compete clauses is clear and specific: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” 

Those exceptions in the law relate primarily to the sale of a business and partnerships in a business, which typically do not relate to therapist employment. However, they could be relevant if a therapist is a partner or co-owner of a group practice and then chooses to leave the group practice. 

3. No one owns a client, but employers typically own client information and records.
Simply put, clients aren’t property. If you leave a workplace and choose to start your own practice, clients who you’ve been seeing may very well want to follow you to your new practice. Your former employer may prefer that clients not follow you to your new practice, but they generally can’t restrict the client from doing so. 

They often can, however, prevent you from informing clients about your soon-to-be-new practice prior to leaving the employer (using the non-solicitation clause mentioned above, employers reasonably can prohibit you from using your employment to encourage customers to leave). 

If you do open your own practice, and clients wish to follow you, the treatment records from your prior employment typically belong to the employer, and not to the clinician or to the client. The client typically must sign a release of information authorizing their treatment records to be released from the employer to you.

Should You Worry About Non-Compete Clauses?

I know some therapists are immediately skeptical of an employer who inserts a non-compete clause in their employment contract. While I understand that skepticism, I’m also empathetic toward employers who don’t want a major investment in training to go to waste (or worse, to primarily benefit a competing business). 

If you’re considering taking a job with an employer who has non-compete language in their employment contract, you should read it over carefully to understand clearly what activities are prohibited and what aren’t. In many cases, it will be helpful to read through that language with the help of an attorney. 

If you are currently working for an employer and have a non-compete clause in your contract, and you’re considering starting a private therapy practice, the same idea applies. Read the contract carefully, ideally with the help of an attorney. 

You may also want to discuss with the employer what their non-compete language means in practice. Can you come to an agreement that you’re both happy with? Does the employer actually pursue legal action against former employees? For many employers, unless the former employee has behaved in an egregious and clearly damaging way, the cost of legal action to enforce a non-compete clause outweighs the benefit. 

Again, however, caution is warranted: Some employers include language in their contracts making clear that if they do have to go to court to enforce a non-compete clause, the employee may also be held responsible for the employer’s legal costs.

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Disclaimer: Much depends on the state you’re in and the specifics of your employment situation and contract. This article is for informational purposes only. Nothing in this article should be considered legal advice or as a substitute for a consultation with a qualified attorney.