When veterinarians' caseloads are reduced, noncompete agreements can impose crippling restrictions.
I hired a relief veterinarian to fill in for me today so that I could get caught up on some personal business. When I stopped in at my usual morning coffee place wearing blue jeans, the counter clerk seemed shocked not to see me wearing a tie and khakis on a Tuesday. I told her that I had the day off, and immediately a worried expression crossed her face. "Oh, no!" she declared. "An unexpected day off! That's bad! Your job isn't laying off, is it?"
I assured her that all was fine, but this morning's coffee experience brought home to me once more how the fragile economy has caused many people to look differently at circumstances that a decade ago would have seemed routine. Five years ago when everyone's house was worth double what it was really worth, convenience store clerks viewed a day off as a blessing. Five years ago when everybody's 401(k) was flush with cash, folks called in sick at the convenience store without having to think about whether they'd have a job when they recovered.
Now we're at the point where the coffee lady is worried about the veterinarian losing his job. And why not? Every other person who stops in for gas or a Twinkie is either looking for a job or underemployed.
And the store clerks are right to worry about us. The mere fact that we in the veterinary profession have eight-plus years of education in no way guarantees us the employment circumstances of our dreams—or even employment at all.
Ironically, the addition of supplemental training, including board certification, may result in more job insecurity, not less. In my legal consulting practice I'm seeing more and more instances in which the veterinarians in multidoctor hospitals who are most at risk for cuts in hours, caseload or compensation are the more experienced and highly credentialed doctors rather than their less-experienced, less-well-trained—and less-expensive—counterparts.
For example, in circumstances where there is only enough work for one-and-a-half specialists, an emerging trend is to make the more highly compensated specialist switch to part time while adding extra cases and hours to the person who makes less per hour, per case or per year. Nobody loves this situation, but I see it on a regular basis. Add in just one more factor and this trend becomes a devastating situation for associates. What happens, say, if the highly paid veterinarian who gets forced into a reduced schedule also has a strict noncompetition clause controlling her ability to moonlight or to move to a nearby practice more capable of supporting her salary needs?
The problem is real, not theoretical. There often is a fairly aggressive noncompetition framework built into the typical employment contract for experienced and boarded veterinarians. The theory is that doctors who develop loyal followings throughout years of client contact or who possess special and unique training present a greater threat to the employer's practice than practitioners with only minor connections to the practice's client base.
So what happens when the experienced or boarded veterinarian, perhaps working on a percentage-based or commission-based compensation scheme, suddenly experiences a caseload reduction because the practice has hired a young associate on salary? When that doctor is no longer assigned enough cases to permit him to generate sufficiently high revenue to result in his expected salary (the salary on which his lifestyle depends), he may well need to start looking to do some work on the side or seek a different position.
In his nervousness about his diminished caseload, this highly trained veterinarian goes to read the noncompete language in his employment contract. He discovers that he is not permitted to moonlight at another hospital to supplement his flagging income. Nor is he allowed to make some extra money doing consulting or even routine practice, either inside or outside his noncompete region. Worst of all, he discovers that he has agreed to noncompete terms of long duration and a substantial distance from his current workplace. To find a different job in his specialty, he has to move away.
This veterinarian is in a world of hurt. He can't afford to move but he can't afford to stay either. Least of all can he afford to litigate the terms of that noncompete he signed when times were good and specialty cases were plentiful.
All of which raises a central question: Is it time to begin thinking of noncompetition contractual language in a different way? Is the design of competition protection too archaic for the economic and demographic realities of the 21st century? There's no question in my mind: Yes.
In a practice world where major economic changes, third-party payment issues and expanding corporate veterinary practice are rewriting the rules of how individual practitioners interact with their employers and workplaces, it's probably a mistake to think that a key element of the employment contract—that pesky set of nocompetition terms—is immutable and cannot be custom-tailored to protect both the employer and the employed associate veterinarian.
When more thought and consideration is put into the design of the noncompetition language of a veterinary employment agreement, several different objectives can be better served. Consider these points:
1. Employers worry about the enforceability of noncompetes they impose on doctors they hire. Courts have looked at these clauses in terms of whether or not they appear "reasonable under the circumstances of the employment." What better evidence could there be of "reasonableness" than a situation where the clause or paragraph has been custom-designed to protect both the employer's client base as well as the associate's livelihood and financial security in the event of an economic downturn?
2. Employed veterinarians are afraid to negotiate their noncompetition agreements with potential employers and often walk away from good potential positions at the first sign that a hospital won't bend on the terms. If a veterinary hospital or chain of corporate practices routinely took into consideration the possibility of future unexpected economic troubles (a drop in caseload or revenue) in its dealings with potential associate hires, it would have a larger number of such applicants, and the doctors hired would be less edgy about their compensation on a day-to-day basis.
Next month in this space we'll look at some newer and more innovative ways to draft noncompetition language. There are a number of ways to customize and design this sort of language, but I would suggest that the sort of artful drafting I'll propose next month is missing from 99 percent of the veterinary employment contracts currently in effect.
In today's economic world, noncompetition clauses are more important than ever. Think of it this way: When auto workers or aircraft engineers get laid off, they're usually just out of a job. When business picks up, they can return to pretty much any workplace where hours are available. In our profession, a layoff or reduction in hours may mean that the doctor's job is not only gone but that he or she can't return to work at all without agreeing to move, with family in tow, out of town for a year, two years or longer.
There has to be a better way.
Dr. Allen is president of Associates in Veterinary Law P.C., which provides legal and consulting services to veterinarians. Call (607) 754-1510 or e-mail firstname.lastname@example.org.