If you are a member of a group medical or dental practice, at some time you probably have wondered, “can I or another doctor in this practice set up a competing practice and service existing patients?”  This question is crucial both to the existing group and the doctor who would set up the competing practice. 

In this article, I will give a brief roadmap of the issues relevant to a doctor setting up a competing practice.  I will try to give both legal and common-sense advice to all concerned parties. 

The advice given in this article is very important – doctors frequently set up competing practices, and invariably the former group is unhappy.  The threat of litigation is very real.  For this reason, all parties need to understand what can and cannot be done when a doctor would compete against his or her former group practice. 

The Contract Might Not Be Worth the Paper It’s Written On.  After termination of employment, a contractual non-competition clause usually is unenforceable.  That is, under California law, a doctor ordinarily may compete with his or her prior employer or group, even if the doctor signed an agreement that prohibits competition.  Of course, there are exceptions to this rule.  In relevant part, a non-competition clause can be enforceable if it was (i) entered into as part of the sale of a business; or (ii) entered into pursuant to a partnership agreement or shareholders agreement that prohibits a withdrawing doctor’s competition in a limited geographic area. 

Who Gets the Patients?  Although a prohibition on competition may be unenforceable, the departing doctor still may not engage in unfair competition. Unfair competition includes the use of confidential information and trade secrets of the former employer.  In general, the law will prohibit a doctor from using the patient list of the former practice, but only if the following two elements exist: (i) the patient list was a trade secret; and (ii) the former doctor misappropriated the list. 

As to the first element, a patient list can be a trade secret when the group has actually kept it secret, and has invested much time and effort in creating it, including for example if the list contains information about the particular needs and interests of the patients. 

As to the second element, once the prior employer or group has proven that the patient list is a trade secret, it then must prove that the doctor misappropriated the list.  California courts look to whether the departing doctor actually solicited the group’s patients, as opposed to merely announcing a change in professional affiliation.  In other words, the doctor is permitted to announce his or her new status, but may not go further.  The distinction between solicitation and mere announcement is a shifting line, however, and the departing doctor must take great care not to cross it. 

Note that applicable law may even mandate that the departing doctor announce his or her departure to existing patients.  Under the Dental Practice Act, the departing doctor may not abandon a patient without written notice to the patient.  To date, no court has addressed this factor, however.

Who Gets the Rank and File Employees?  The rule with respect to the solicitation of office managers, nurses, technicians, dental hygienists and other employees is similar to the rule for the solicitation of patients.  In general, California law protects the right of employees to change employment.  A departing doctor, however, may not solicit or ask the employees to leave the former group.  Rather, the departing doctor may only announce his or her plans.  The doctor must then back off, and permit the employees to initiate the next contact – by requesting to join the departing doctor in the competing practice.  

Finally, please keep in mind that the law of competition is by its nature fluid and gray.  There are few hard and fast rules, and no guarantees can be given on the outcome of any particular dispute.  Moreover, the costs of litigation (let alone losing in litigation) are such that one does best to avoid it altogether.  I urge you, therefore, to keep this common-sense advice in mind: at all times be sure that you are acting in a decent and fair manner, and well within the boundaries of the law.  Remember that, in the final analysis, courts try to protect persons who have acted with decency.

This article only gives a short roadmap of the issues raised by a departing doctor’s competition with his or her former group or employer.  There is a lot more to this subject than introduced here.  Before you do anything, get competent legal counsel to help you. 

Call me to schedule a legal consultation: 510-796-9144