A medical spa’s employees are vital to its success. You probably invest a great deal of time, effort, and money toward making your employees the best they can be. And, as with any other investment, this outlay should be protected. This can be accomplished with contractual clauses known as restrictive covenants, which can prevent former employees from working for a competing medical spa and taking your clients and employees for a certain period of time. But implementing these clauses and enforcing them are two very different things, so you must understand what they’re all about before attempting to utilize them.
Non-Competition Agreements
A non-competition agreement is a part of a contract that is designed to bar an individual from working for a competing medical spa for a set period of time in a designated geographic area. If employees with non-competition clauses in their contracts choose to leave your medical spa, they would theoretically be subject to legal action if they went to work for another medical spa within the agreed-upon time span and geographic area.
This seems fairly straightforward. However, in reality, non-competition agreements are somewhat difficult to enforce to their fullest extent, because American courts tend to be very reluctant to prevent people from working where they want. The laws governing these arrangements vary from state to state—California, for example, has essentially established a ban on non-competition agreements—so you should check with your local healthcare attorney to find out if it is worth your time to devise them for your employment contracts. If so, you’ll need to put some thought into crafting them in order to make sure that they accomplish what you want.
Non-Solicitation Agreements
A non-solicitation agreement is a part of a contract that is designed to prevent a former employee from soliciting clients and other employees from your practice for a specified amount of time. In the medical spa setting, it’s not unusual for patients to become attached to the nurse practitioners, laser technicians, and nurse injectors to whom physicians commonly delegate treatment. When one of these people decides to leave a practice, that practice needs to make sure that no effort is made to take said patients along—those are the practice’s patients, not the individual’s. If former employees make any effort to reach out to those patients and entice them to follow the employees to another practice, it is a clear violation if any non-solicitation agreement has been accepted.
Unlike non-competition agreements, non-solicitation agreements are commonly enforced, as courts are consistently willing to punish the misappropriation of a company’s assets—in this case, patients and employees. And with good cause. Imagine the financial hit a medical spa could take if nurse injectors or laser techs were simply allowed to take the clients they’ve treated when they leave. However, like with non-competition agreements, you must be sure that any non-solicitation agreement you employ is carefully crafted to best protect your interests.
Keys to Enforceable Contracts
Simply writing a non-competition or non- solicitation agreement into your employment contracts does not guarantee that they will be enforced when push comes to shove. But if these clauses adhere to the following guidelines, a medical spa’s chances of collecting damages if they are violated improve dramatically.
Adequate consideration: In order to get something—in this case, protection for your medical spa should an employee leave—you must give something. This is known as adequate consideration, and every contract must include it in order for it to be enforceable. If you include a non-competition or non-solicitation clause in employee’s initial contract when they are hired, it is understood that employment is the consideration they are receiving in return for signing the contract.
However, if you wish to incorporate one of these restrictive covenants into an existing contract, some states require that you provide your employee with something extra in return for it—typically a pay raise or a promotion. These states do not consider continued employment to be adequate consideration. If an employee does not receive something in return for this newly incorporated restriction, it is unlikely that a court will view the contract as enforceable. Check with your local healthcare attorney to find out what constitutes adequate consideration in your state.
Legitimate business interests: Courts typically permit the enforcement of restrictive covenants when they are utilized in the protection of confidential information, investment in specialized training, and patient/client relationships. Make sure that any restrictive clause you wish to employ addresses these issues in some fashion—reach for anything more, and you risk its enforceability.
Reasonableness: A restrictive covenant should not be excessively long in duration or cover a geographic area any larger than need be. Of course, both of these factors are case-specific—if a medical spa is in an urban area with a great deal of nearby competition, for example, it makes sense that the geographic restriction should cover a smaller area than if it were in a small rural community with one other medical spa in a 20-mile radius. Again, consult your local healthcare attorney to help you determine what can be considered reasonable in your particular situation..—Alex R. Thiersch
A Crucial Decision
When delving into the world of restrictive covenants, it’s crucial to make sure that any non-competition or non-solicitation contract provided to employees be legal and binding. After all, a medical spa’s employees and clients are its lifeblood and need to be protected. If you have existing contracts, make it a point to have a local healthcare attorney review them for viability. If you don’t have them in place and want to include them in your employment packet, make sure to work with a healthcare attorney to craft them correctly the first time.—