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Controversies in Nephrology Nursing

Non-Compete Clauses: Are They an Appropriate Business Strategy?
Christy Price Rabetoy, Department Editor

Covenant Not To Compete Agreements: Are They a
Necessary Evil?
Mary Rau Foster, RN, BS, JD, MBA
President of Foster Seminars and Communications LLC
Brentwood, TN

The loss of business, trade secrets, clients and personnel can be very costly to an organization. To minimize their losses, many companies have used non-compete agreements as a tool to protect themselves. Typically, the use of such agreements is found in companies that could experience financial loss if employees became employed by competitors, taking with them client lists, trade secrets, and valuable knowledge.

The non-compete language usually specifies that an employee may not work in a particular business industry within a geographical location (i.e., 50-mile radius of the current employer’s location) for a specified period of time (i.e., 1 year) after the resignation becomes effective.

Contracts with non-compete clauses are legal in many states, but have been frowned upon by the court system when the clauses have rigid time and geographic restrictions or do not serve a legitimate business purpose other than preventing employees from seeking employment elsewhere.

As dialysis facilities feel the sting of nursing shortages and are vying for nurses in a shrinking labor pool and as they experience the loss of personnel who have undergone facility-provided dialysis training, some companies may turn to the use of contracts with non-compete language to reduce their losses. By requiring that a new hire or current employee sign a non-compete agreement, any competitor that attempts to or does hire an employee bound by such an agreement, may find itself facing a “tortuous interference with a contract” lawsuit brought by the facility protected by the contract.

Who Benefits From Non-Compete Agreements and What Are the Benefits?
Obviously the benefitting party is the facility or company requiring the agreement. Unless it contains language that is unduly restrictive or, if executed in a state which prohibits such restrictive covenants, the agreement can provide the company with some measure of security and comfort. If the facility has provided dialysis or other specialized training to an employee, an employee may be prohibited from benefitting from the training, seeking employment elsewhere immediately after undergoing the training, and from depriving the facility of the ability to benefit from the costly training.

If there are other competing dialysis facilities in the area, those facilities face legal action if they hire an employee who is bound by a non-compete contract. The effect is that the competing facilities may be unwilling to recruit or hire employees from facilities, which have employees operating under such restrictions.

What Impact Does Non-Compete Agreements Have Upon Staff Retention and Morale?
Presuming that the non-compete language is legally acceptable in the state where the contract is executed, the impact may be that employees who may have resigned to seek employment with another dialysis facility will be unlikely to leave in violation of the contract.

Requiring that new hire employees sign a restrictive contract as a condition of employment can have an adverse effect on recruiting and hiring efforts. The chilling effect that this requirement may have on an applicant’s desire to become a member of the staff can result in an applicant experiencing cold feet. While most employees who are hired probably intend to remain on staff at the facility for some lengthy period of time, the presentation of such a formal legal document may raise questions in the applicant’s mind about the underlying need for such employee promises that if they leave they won’t seek employment in a competing unit. It can lead to erroneous presumptions that there may be something wrong within the workplace environment that may cause employees to seek employment elsewhere sooner rather than later.

Requiring that current employees sign a non-compete agreement as a condition of continued employment may have a demoralizing effect as well. One of the legal requirements of a contract is that there be some of type of consideration (one party gives up a right or benefit and another party receives a right or benefit) for that contract to be legally binding. If employees are required to give up their right to seek future employment in an unrestricted manner in exchange for continued employment, employee confusion may ensue and morale may become diminished as they seek to make sense of this type of encumbrance.

Is a Non-Compete Agreement the Answer?
Balancing the employer’s need to protect its assets, to benefit from the monies spent on special employee training, and the need to retain staff and maintain stability in the dialysis setting, with the need of an employee to be free from restrictions in future employment opportunities, begs the question, “Is there another way that the current and potential problems can be addressed and resolved without resorting to a restrictive legal document?” Is it possible to create a workplace environment that encourages staff members to remain on staff, where morale is adequate, where current employees and new hires are internally motivated to stay, and that external motivation (through a chilling legal document) is unnecessary?

I think so. However, whenever the only tool that you have is a hammer, all of the problems will look like nails. The legal hammer may be an effective way to control employees, but isn’t it loyalty and trust what an employer is really looking for? They cannot be commanded, only earned.

“We live in a world of problems which can no longer be solved by the level of thinking which created them.”
-Albert Einstein

Non-Compete Agreements Have No Place in Healthcare
Gary Rabetoy, MD, FACP
Retired nephrologist who has worked in all areas of American Medicine
both Government (Military, Veterans Administration)
and Civilian (University, Private Practice, Industry)

A non-compete agreement prohibits a terminated employee from competing with an employer or other entity by imposing a ban covering scope of practice, time, and geographical area. At one time these agreements were considered to be presumptively invalid because it was recognized that they had the potential to deny affected employees a livelihood, deprive society of needed services, and facilitate monopolization.

As the law evolved, the balance has shifted in favor of the employer and the non-compete agreement has become a commonplace feature of employment contracts. This has resulted in a system that features arbitrary enforcement and subjective interpretation. It also opens the door to abuses of power and deceptive business practices. The latter can cause a non-compete agreement to be activated, thereby giving complete control to the offending party and leaving the employee essentially defenseless.

Through the technique of protracted litigation the law may be used as a weapon of attrition rather than as an honest means to determine right or wrong. The real goal becomes a settlement followed by a gag order which, of course, fails to establish any reasonable standard(s) of practice. Even the veiled threat of a lawsuit is enough to cause individuals to act in a manner that is counter to their best interests.

In the practice of medicine and nursing, such agreements restrict competition, disrupt continuity of care, and remove needed medical services from the public. Furthermore, it seems unreasonable that someone should be obligated to an employment situation where just choosing to work elsewhere could result in their possible economic ruin and physical relocation.

The first rule of business is to stay in business. The first rule of medicine is to do no harm. No more so than in the non-compete agreement is the clash of business and medical ethics more apparent. By signing such an agreement, both the employer and the employee have relegated the patient to second place. In essence, the employer is saying that care will be provided but only on their terms or possibly not at all. The employee is expressing a willingness to abandon the patient in the event that the working relationship with the employer sours. The best interests of the patient and society are forgotten. Furthermore, there are already methods available to prevent business loss and compensate businesses for those employees who fail to honor their contracts that do not involve unnecessary non-compete agreements.

Non-Compete Agreements Are Discouraged
The AMA’s Council of Ethical and Judicial Affairs officially discourages non-compete agreements. The American Bar Association’s code of professional conduct does the same. At least 28 states have enacted legislation curtailing this business practice to some extent, and 3 states (Colorado, Delaware, and Massachusetts) specifically prohibit non-compete agreements involving physicians.

The non-compete agreement is really all about fear; fear of the loss of a business and fear of the loss of a job. It is a tactic to enforce loyalty rather than to earn it. When you can get away with it, why be elegant by restraining power? In the practice of nephrology, especially as related to ownership interests in dialysis units, it is a tactic that has the propensity to color judgment. To gain access to the benefits of ownership, all one has to do is steer patients the right way. In exchange, one gives up the high ground of independent thought and action by signing the non-compete agreement. The lure of easy money has a very strong appeal indeed. Out of this comes a conflict of interest. Who comes first, the business or the patient? I suspect few who have been subjected to this practice can honestly say that at some point they were not put in an uncomfortable position.

Agreements Cause Considerable Harm
I have personally seen considerable harm caused by such agreements. This has ranged all the way from disruption in the provision of medical care to unethical behavior on the part of medical personnel resulting in the death of patients. After all, what’s more important, one’s business/job or the patient? If the patient is harmed and the business (or one’s job) is protected, that’s just business, isn’t it? Everyone gets sick sooner or later. If you were a patient, is this the way you would like to be treated? As one who may have signed a non-compete provision, are you happy to have signed away your precious freedom simply for a job and money? Do you realize that you will be (and effectively are being) treated as a spare part in the event the non-compete agreement becomes activated? Would you even like to be subjected to the possibility of any of these things happening? I think most would not. Until this practice is abolished universally in healthcare, we are all at risk.

The Controversies in Nephrology Nursing department focuses on exploring ethical and clinical issues within the nephrology clinic practice in a point/counterpoint format. Address correspondence to: Christy Price Rabetoy, Department Editor, through the ANNA National Office; East Holly Avenue/Box 56; Pitman, NJ 08071-0056; (856) 256-2320; or by emailing her at christycpr@comcast.net. You may also log onto this column at www.nephrologynursingjournal.net (clink on Department link) and email your comments to the Editor (see Discussion Area). The opinions and assertions contained herein are the private views of the contributors and do not necessarily reflect the views of the American Nephrology Nurses' Association.