This recent case involves a dispute over the enforcement of a restrictive covenant in an employment agreement between an ophthalmology practice and one of the doctors it formerly employed.
The agreement contained two clauses that were at issue- one that prohibited its assignment (handing off obligations and rights of a contract to another party) and a restrictive covenant. The covenant provided the option of either not practicing ophthalmology in a certain region for two years after the termination of employment or paying the ophthalmology practice 40% of the gross receipts attributable to the last year of employment or $200,000- whichever was greater.
Two important sets of facts: 1) In 1999, the company assigned its assets to its only shareholder. 2) The employment contract ran from July 14, 1999 to July 13, 2000, but the doctor continued to work at the ophthalmology practice until he voluntarily left in 2008. Two months after leaving, the doctor opened his own ophthalmology practice and his former employer filed suit alleging a breach of the restrictive covenant.
In a nutshell, the former employer argued that the employment contract was assigned in 1999 to an “affiliate practice” and the restrictive covenant remained in full effect despite the fact that the original contract term expired in 2000. The doctor argued that the assignment was not valid, the employment contract expired in 2000 and he was no longer liable. The court agreed with the doctor- he was free to practice and the former employer would not be receiving any money from him!
It is imperative to fully understand all of a contract’s terms, clauses and provisions. Otherwise, you may find yourself on the losing end of a lawsuit that YOU bring. Don’t let this be you! Contact C&G today!
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