Non-compete agreements: When veterinary associates and practice owners clash

Editor's note: Non-compete agreements have become pervasive in veterinary medicine. This month DVM Newsmagazine begins a two-part series focused on trends and problems associated with non-compete covenants. Next month, veterinary legal expert Dr. James F. Wilson talks about the legal issues faced by owners and associate veterinarians as they relate to non-compete agreements.

National Report — When Dr. Christie Cichra graduated from veterinary school in 2006, she had a job lined up.

She was going to work in a Florida-based practice. The owner talked about an equity stake in the practice, but the dream never materialized after she signed a non-compete agreement. In fact, her boss decided not to sell afterall.

"I was naive," says Cichra, a University of Florida graduate.

Cichra joined the equine practice and began working there with the understanding that she would eventually take over the business, though she and her boss had not yet hammered out a legal agreement, she says. After working there for nearly a year, Cichra was worried that the deal might go south. After she pushed for a contract, the owner finally agreed, she says. But, the document made no mention of a future sale. Cichra worked with a lawyer to make changes to the agreement. She finally signed the contract, which included a non-compete covenant, and that was when it all fell apart.

"Within a few weeks (of signing), he said that he didn't want to sell the practice, and he wanted to give me a pay cut," she says. "So I left. I said, 'I can't do this.'"

And that's when the lawyers jumped in. Her former boss hired an attorney to try to get Cichra to adhere to the non-compete, which, according to the terms, barred her from practicing within a 30-mile radius from the clinic for two years.

Geographic limits

The geographic restrictions of a non-compete can be hard to swallow for some associates. What's more, as an equine practitioner, the client pool is smaller.

"A 30-mile radius is pretty big, and there are a lot fewer horses (here) than cats and dogs," she says. "(The impact of the non-compete) is more devastating for an equine practitioner because we travel to farms. We're not just in one building each day."

For Cichra, the biggest concern after leaving her former employer's business was continuing to be able to practice. "If I didn't fight it, I wouldn't have been able to do what I wanted to do," she says.

And while there are two sides to every story, veterinary practice owners are worried about protecting their life-long investments. They entrust associates to enter their practice, take up the mission of the practice, bond with clients and help build the practice that they have nurtured.

Jockeying for clients is part of doing business in every industry, but a client list and its details are proprietary, notes Dr. Ted A. Sprinkle Jr., who is CEO and co-founder of Pet Partners, Inc. "Taking a client list is basically stealing whether you have an agreement or not. You can't be paid for working and think you own something that you don't," he says. "That happens a lot in this profession. Associates forget they were employed and had a salary."

Protecting good will

Sprinkle is well versed in the intricacies of non-competition covenants. His company buys veterinary hospitals nationwide. "We have to put in non-competes that protect our investment and are fair," he says.

After all, the greatest part of any such purchase is good will. Good will is often derived from the owner, who has built a practice over many years. But, Sprinkle acknowledges, "the larger the practice, the less the good will resides with any one individual."

That service reputation is something owners try to protect when hiring new associates. Plus, owners want to retain those clients built from that good will. Sprinkle does acknowledge, however, that some clients may want to follow an associate who leaves a practice.

"The client always has the right to see whomever they wish or to go to whomever they wish," he says. Plus, he adds, "I would hope that an associate veterinarian worth anything, working in a hospital for more than two years, would have some sort of following by a certain number of people."

When it comes to separation, Sprinkle says that the most important key to preventing conflict is communication, and keeping it out of court is his number one goal. "We have had experiences with non-competes that have been tested by the courts, and I never want it to happen again," he says. And though both instances came out in his company's favor, Sprinkle says that it was, "a long and onerous process where nobody wins except the attorneys. It's a waste of energy and a waste of time. I'd rather have dialogue and prevent these things from happening."

Unfortunately for Cichra, the only path to resolution lay in the courts. In retrospect, she says, she shouldn't have signed the contract that included the non-compete, but she wanted to buy the business.

Cichra hired a lawyer, and — $8,000 later — was released from her non-compete.

Moving on

Cichra says she will never sign another non-compete. And, for now, the prospect isn't looming. Cichra owns her own business, a mobile veterinary unit, and says she couldn't be happier.

And to those facing signing a non-compete, she offers some advice: "Remember what you're worth, and don't just sign something because you need a job. You need to hire a lawyer to read it over and understand the implications of it."