Today's Veterinary Business

FEB 2019

Today’s Veterinary Business provides information and resources designed to help veterinarians and office management improve the financial performance of their practices, allowing them to increase the level of patient care and client service.

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49 February/March 2019 • TODAYSVETERINARYBUSINESS.COM Leadership LEGAL LINGO Have you ever recruited the perfect job candidate only to find he had a noncompete agreement with a current or former employer? At a time when unemployment rates are low, the situation can be particularly frustrating. A common assumption is that legal liability for breaching a noncompete falls on the employee. Unfortunately, that's not always the case. New employers potentially are liable for damages if they interfere with contractual obligations. By Nicole Snyder, JD While the laws regarding em- ployee noncompete agreements can be complicated and disconcert- ing, hiring such an individual with- out liability is sometimes possible. Do Your Homework Here are two questions to answer when faced with a noncompete: Is the noncompete enforceable? Noncompete agreements are sub- ject to state laws. To be permissible, they typically have to be drafted carefully and contain strict limits on the employee's restricted activities and the time period and geograph- ic area in which they apply. Evaluate the enforceability by reviewing the following within the agreement: • Does the period of restriction have a stated limit? Most state laws provide that a noncom- pete restriction must be limit- ed in time, typically from one year to a few years. If a time limit is absent, the noncom- pete could be unenforceable. • Does the noncompete agree- ment restrict the employee's activities within a particular geographic area? In most states, the noncompete might apply only to the area in which the employee per- formed services or where the employer has business oper- ations. A missing geographic limit could render a noncom- pete unenforceable. • Does the noncompete agree- ment specifically address activities the employee is prohibited from engaging in? In some states, simply pro- hibiting an employee from working for a competitor is not enough. The agreement may need to specify the types of services and job responsibil- ities the employee must avoid. • When did the employee sign the noncompete agree- ment? Was anything given in exchange for signing it? In some states, noncompete agreements can be signed only at the beginning of employment. In other states, requiring an employee to sign a noncompete as a condition of continued employment is acceptable. Additionally, some states might require that the employee be offered a raise or a bonus in exchange for signing the agreement. Still, beware the blue pencil. Some state laws provide that a court can modify, or "blue pencil," a noncompete if it contains provi- sions that would otherwise render it unenforceable. For example, if the state law requires that a cove- nant be limited to a certain number of months but the noncompete's term is much longer, the employer could ask a court to modify the agreement to make it enforceable. Can the job responsibilities be structured to avoid a violation? Just because an individual has a noncompete does not necessar- ily mean he will be in violation in the new job. Read the agreement closely to find which job responsi- bilities are specifically prohibited. The individual might be able to perform duties that do not violate the terms. Take Precautions If a work-around is identified, these two tips can help if a dispute ensues: • Draft the job description and employment agreement carefully. Document the new employee's duties to demon- strate that the responsibilities do not conflict with the non- compete agreement. Doing this will help convince a third party, or a court, that the employee was not engaged in duties in violation of a cov- enant not to compete. • Require the employee to agree to not violate the noncompete. A good em- ployment agreement will document that the practice in- structed the employee not to engage in prohibited activity. Here is suggested language: "Employee agrees and acknowl- edges that Employee's employment with Clinic and the performance of Employees duties pursuant to this Employment Agreement will not violate any non-competition agree- ment or other similar agreement between Employee and his or her prior employer." When a Violation Is Unavoidable If you determine that the non- compete agreement is or may be enforceable, and there is no way to structure the job responsibilities to avoid a violation, here are four options to consider: • The employee might be able to obtain a noncompete re- lease from the ex-employer. A buyout might be demanded, so your practice could consid- er paying for some of it. • The employee might be able to reach a compromise that allows for engaging in some activities and refraining from others. For example, the for- mer employer might be will- ing to allow the employee to work for a competitor as long as he agrees not to solicit clients or former co-workers. • Consult legal counsel to assess the risk of a claim. After careful consideration of the potential damages and costs, you might conclude that the risk is worth taking. • If you believe the noncom- pete falls into a gray area, you could pursue a declaratory judgment. This is where you ask a court to declare the noncompete unenforceable as a matter of law. Remember that any discus- sions or correspondence you have with the employee about his noncompete agreement could be subject to disclosure during any litigation that might result. These communications can weigh heavily in an assessment of whether a practice assisted an employee in breaching a noncompete. Engag - ing an attorney early in the process will help avoid missteps. Legal Lingo columnist Nicole Snyder is a partner at Holland and Hart, where she advises clients on mergers, acquisitions and complex employment mat- ters. She is a member of the American Veterinary Medical Law Association. It's your move Employee noncompete agreements aren't always enforceable, especially if time and geographic limits are too broad.

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