For medical practitioners who operate under a contract with their practice owner, it is usual to expect that the contract will include a post-contractual restraint. That is, a provision which restricts the dentist’s conduct once they leave the practice. These may also be known as non-compete clauses.
Doctors today must balance providing high-quality care with running a business and source of income. We want all of our clients to consider the impact a restraint provision might have on their work mobility and future opportunities.
A restraint provision will typically provide that the medical practitioner must not engage in activities that are similar to or in competition with those conducted at the practice; and there will commonly also be an express prohibition on the soliciting of patients.
Doctors frequently enquire with us about whether their restraints are enforceable. This may be because a change of practice is imminent, or because they are considering future career plans; or in some cases, they may have already left their former practice only to receive notice that they are in breach of a restraint. Whilst restraints differ contract to contract, and their application and effect is always fact-specific, some general principles are explained below.
restraints must be reasonable
The general rule is that a restraint of trade is contrary to public policy and void, unless it can be shown that the restraint is reasonable. A restraint must go no further than is reasonably necessary to protect the interests of the person in whose favour the restraint operates. Essentially, the courts will assess restraints based on commercial fairness and the need to hold parties to their agreements. Restraints and non-compete clauses: an exercise in reasonableness For medical practitioners who operate under a contract with their practice owner, it is usual to expect that the contract will include a post-contractual restraint. That is, a provision which restricts the dentist’s conduct once they leave the practice. These may also be known as non-compete clauses adawa.com.au 27
When is a restraint valid? Usually, the courts will look at circumstances which existed at the time the restraint was entered into.
Matters such as the following, may be considered:
- The respective bargaining positions of the parties;
- The nature of the business and the industry in which it operates (including factors such as the level of specialisation and competition in the market);
- The restrained person’s knowledge of and connection to the business, and the clients/patients of the business;
- The length of time to re-establish client/patient relationships;
- The seniority of the restrained person and their access to confidential information: A restraint applying to a practice principal will usually be more onerous than one applying to an associate;
- The impact of the restraint on the restrained person;
- The length of time it would take or has taken to fill the vacancy created by the restrained person’s departure.
We are Australian medical indemnity insurance providers and cover your practice with medical indemnity insurance, doctors indemnity insurance, GP medical indemnity insurance, medical malpractice insurance, medical practice insurance, and more. If you are a health practitioner with Tego, we offer 24/7 medico-legal advice and can assist your organisation with any new developments that may affect your practice.
This publication is general in nature and is not comprehensive or constitutes legal or medical advice. You should seek legal, medical or other professional advice before relying on any content, and practice proper clinical decision making with regard to individual circumstances. Persons implementing any recommendations contained in this publication must exercise their own independent skill or judgment or seek appropriate professional advice relevant to their own particular practice. Compliance with any recommendations will not in any way guarantee discharge of the duty of care owed to patients and others coming into contact with the health professional or practice. Tego Insurance Pty Ltd is not responsible to you or anyone else for any loss suffered in connection with the use of this information.
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