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Under Maryland law non-competition agreements in physician contracts are subject to the same rule of reason test as every other profession. A non-competition agreement in an employment contract that is support by adequate consideration (typically employment) and is ancillary to the employment contract will be upheld if the restraint is properly limited in area and duration, is reasonably necessary to protect the employer’s business interest, and does not impose undue hardship on the employee or disregard the interests of the public. “Whether the duration of a covenant not to compete is reasonable depends on the facts of a particular case and the interest of the employer sought to be protected.” A court will determine the enforceability of a non-competition agreement based upon the particular facts of each case. “It is well established that where a restrictive covenant is bargained for in exchange for employment, the employment will be sufficient consideration for such an agreement.” A non-competition agreement will be enforced only against employees who provide unique services, or to prevent future misuse of an employer’s trade secrets or solicitation of customers. Maryland courts will also review terms including geographical limitations, time limitation, and scope of the limitation in determining the reasonableness and enforceability of the restraint.

In Lofton, Adrian Lofton was an ophthalmic technician and was hired by employer TLC. As part of their employment agreement, TLC required Lofton to sign a non-competition agreement however; Lofton did not actually sign this agreement until three days after he began working for TLC. The first section of the restrictive covenant prevented Lofton from disclosing any confidential or trade secret information even after termination. The second section of the restrictive covenant prohibited Lofton from “working for any medical clinic, outpatient, ambulatory or diagnostic facility or any other heath care facility equipped with an excimer laser or other laser intended to be used for laser vision correction procedures within a fifty mile radius of any TLC site.” Lofton was fired because he failed to attend required seminars during a conference. A competitor of TLC subsequently hired Lofton and fired him upon notification from TLC that there was a breach of the non-competition agreement. Lofton brought suit alleging that (1) TLC fraudulently induced him to sign the non-competition agreement because a TLC employee had told Lofton that the clause was unenforceable, (2) TLC breached the employment contract because he was not provided with sufficient consideration, and (3) TLC breached its duty of good faith and fair dealing. The court dismissed each of Lofton’s claims. The court determined that there was no material misrepresentation to warrant fraudulent inducement. The court dismissed Lofton’s second count because it is well established by Maryland law that where a restrictive covenant is bargained for in an employment agreement, the employment itself is sufficient consideration. Finally, the court dismissed Lofton’s third count because the “duty [of good faith and fair dealing] does not extend so far as to override or modify explicit contractual terms.”

Although Lofton does not address the enforceability of a non-competition agreement, it observes the viability of claims that may be asserted in an action concerning a non-competition agreement. Lofton shows that an employer’s oral representation of a contractual term may not be considered a material misrepresentation because it is an employer’s opinion, not a factual assertion. Further, a former employee may not have a claim against his former employer for termination of his subsequent employment by the former employer’s notification of a breach of a non-competition agreement. Due to this, employees must construe the contracts they sign specifically to the written provisions.

As is the case with Virginia and District of Columbia, Maryland courts are known to construe employment agreements along with their non-competition clauses as literally as possible. When there is room for different interpretations of a provision, it will be construed in favor of the employee. To eliminate this risk, an employer should tell his attorney exactly what he wants his contract to state both in the employment contract itself, as well as the non-competition clause, and the attorney will draft it in a way to ensure that the provisions will be enforced together. This process will limit the possibility of contractual provisions contradicting each other.

A physician employer must be careful not to draft a non-competition agreement that is overly burdensome because it will be struck down. Drafting requirements such as having the former employee screen every single patient to make sure there is no connection to the provisions in the signed non-competition agreement is unrealistic and will be considered overly burdensome. In drafting restrictions, an employer and his attorney must contemplate whether the limitations they establish are reasonable otherwise they run the risk of the provision being unenforceable.

Further, a physician employer must be careful not to draft a non-competition agreement that is overly broad. An overly broad restriction is not narrowly tailored to protect an employer’s business interests. In order to remain in the realm of enforceability, an employer should limit the employee restrictions to specific activities that the employee performed while employed with the employer. Non-competition agreements cannot encompass activities that the employee did not engage in under the employer’s employment. To restrict activities outside of the employee’s performance is not considered to be narrowly tailored to the employer’s business interests and may prevent the employee from earning a living elsewhere. Restrictive language such as “any medical position” will likely be determined to be overbroad and unenforceable because it is too encompassing.

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