Non-compete Clauses: Thoughts for the New O&P Professional
December 2016 Issue
For a new clinician just entering the profession, it can be tempting to agree to almost anything in exchange for a job offer. In fact, when interviewing for that first position, many people feel as if they have no negotiating power at all. I remember the first time I was asked to sign a new employee contract-it was overwhelming, to say the least. Despite the best advice from my father, a retired attorney, I did not feel that I could request the changes he proposed to my contract. This article reviews the intention and current use-or misuse-of non-compete clauses (NCCs) in the O&P profession to help other young professionals make informed decisions about signing new employee agreements that may contain this type of clause. (Author's note: This article represents a clinician's research and opinion and should in no way substitute for legal advice.)
NCCs or covenants not to compete (CNC) are provisions written into many new employee contracts. The primary purpose of these contracts is to protect a business' trade secrets and help it maintain a competitive edge in its market by preventing a former employee from working for a competitor within a certain geographic location for a certain period after leaving employment with that business. These types of agreements have been used across all industries for hundreds of years. Although the original intent of the covenants was to protect the employer's intellectual property, they have come to be misused in more recent years. Evidence suggests that misuses are resulting in high costs to both workers and the U.S. economy. A March 2016 report compiled by the Office of Economic Policy, U. S. Department of Treasury, "Non-compete Contracts: Economic Effects and Policy Implications," identified the cost of unnecessary NCCs, and President Barack Obama is now requesting that government agencies propose new ways to promote competition within the workforce, as well as educate workers about how to make informed decisions. The goal is to reform current state policies in an attempt to build a more fair and dynamic labor market.
Because there is no federal regulation of NCCs, these contracts are enforced based on the jurisdiction, which means that an employee's rights differ from state to state. Most NCCs are written by the employer in a manner that favors the employer over the employee, and therefore leaves the employee with little bargaining power after the contract has been signed. Although NCCs can be beneficial when used in a limited capacity, when they are overused they negatively impact the employee and economy at large through decreased wages and limitations on job mobility and innovation. The lack of education about NCCs has led to a large number of employees who are limited in moving between jobs, which also limits their bargaining power for better conditions and wages with their current employer. In fact, statistics cited in the aforementioned report show that employees who have signed NCCs earn 1.4 percent lower salaries than their colleagues who have not entered into such an agreement. A limitation on job mobility can inhibit competition within a region or even within an industry, and limit sharing of best practices, thus creating information silos. This phenomenon impedes innovation as each individual company then continues to reinvent the proverbial wheel rather than moving forward with collective knowledge of what works best.
The National Commission on Orthotic and Prosthetic Education (NCOPE) states that it does not look favorably upon the use of NCCs with residents. However, the decision is ultimately up to the employer and the governing laws of the state in which the practice is located. Employers may be less willing to invest in an employee's education without a long-term commitment from him or her. In the case of a residency program that may take on four new residents each year, it may not be feasible for the practice to hire each of them. Therefore, the employer assumes that many of the residents will find employment elsewhere following completion of their residencies. A smaller O&P practice, though, may use residencies to shape future practitioners for that practice; these are the clinics that would tend to use NCCs. Let's revisit the original intention of an NCC, which is to protect a company's trade secrets-something that typically only people in upper-management positions are privy to, and who also tend to be the most highly paid employees within a company. With that in mind, a resident, or even a non-managing practitioner, is unlikely to have that proprietary information and should not be a threat to the company's competitive edge. This is where much of the NCC misuse comes into play.
Regardless of the legislation and rights of the employers and employees, most employees will not challenge an employer; employers know that and may use NCCs as tools of intimidation. In cases in which employees could fight and win a legal case against a misused NCC, they may not have the resources for legal representation. And if they do, they could win the battle but lose the war. In other words, they could win the right to work at another employer of their choosing but not recoup the time and money lost in the fight.
How can employee contracts be made fair to the employer and the employee? As an O&P practitioner, not an attorney, my best advice to anyone entering these negotiations is to have frank conversations before a contract is written. You should also be familiar with the labor laws in your state so you know what can be legally upheld. This may require you to seek counsel from a labor attorney in your state. I urge you to see both sides to understand why it is important for the employer to secure a commitment from you, as well as you receiving a commitment from him or her. With this in mind, try to define your long-term goals and evaluate how a contract may or may not impact them. If you are considering signing an NCC as part of your employment contract, make sure the limitations seem fair and reasonable to you-the most common example thought to be reasonable is a one-year and 25-mile radius restriction. You could argue that an NCC would only be necessary if you received a future promotion into a management or ownership position. Or you may decide that an NCC is an appropriate symbol of your commitment, but request that the employer offer a similar commitment through severance pay and benefits for the length of time of the NCC. Perhaps you ask the employer to pay for annual travel and registration fees for national conferences and continuing education costs in exchange for your long-term commitment.
So, if you are considering entering into a new employee contract that includes an NCC, there should be a fair representation of both party's interests within the contract. If there is not, then you should reconsider the company's true commitment to you.
Angela Montgomery, CPO, is in clinical practice with Horizon Prosthetics, Boulder, Colorado. She can be reached at .