The days when a doctor or dentist mysteriously disappeared without sharing a word with their patients could be a thing of the past in Colorado following the implementation of new rules on nondisclosure and nonsolicitation agreements.<\/p>\n
Companies use noncompete agreements to protect trade secrets and vital information, and nonsolicitation agreements seek to prevent departing workers from raiding employees and clients. Colorado\u2019s legislature passed major limits in 2022 on how those agreements can operate. This year, it added rules that will make it much easier for physicians, dentists, therapists and other practitioners to take their patients with them without any fear of retribution.<\/p>\n
\u201cIf a physician left to open a competing practice, you could still enforce the damages provisions,\u201d said Heather Fox Vickles, a partner in the Denver office of Venable LLP. \u201cThat is gone now. They can notify their patients and patients have the right to choose and follow their providers.\u201d<\/p>\n
In 2022, Colorado banned noncompete provisions that limited a physician\u2019s right to practice medicine after leaving an employer, say a hospital or clinic. The reforms, however, allowed prior employers to seek \u201creasonable damages\u201d if a physician left and became a competitor.<\/p>\n
Unless a physician was leaving town, there always was a threat that a former employer could pursue damages, which acted as a de facto noncompete clause, Vickles said. Even the fear of having to fight off a former employer was often enough to make a physician go silent and vanish without a trace.<\/p>\n
As of Aug. 6, health care employers can\u2019t sue former doctors they employed for damages related to patients who follow them. Protections were also broadened to cover physician assistants, registered nurses, dentists, midwives and other health care practitioners.<\/p>\n
Practitioners now have unhindered rights to disclose that they are going to practice medicine elsewhere, to share their professional contact information, and to let patients know that they have the right to choose their health care provider.<\/p>\n
The Colorado Medical Group Management Association was among the groups most vocal in its opposition, while the Colorado Hospital Association (CHA) took a more balanced approach, given that some smaller and more rural hospitals stood to benefit if practitioners had more flexibility to move around.<\/p>\n
\u201cCHA and our member hospitals and health systems believe it\u2019s important to support physicians\u2019 ability to move within a community. We also believe that must be balanced with the employer\u2019s investment in caring for their patients,\u201d said Julie Lonborg, the CHA\u2019s senior vice president and chief of staff.<\/p>\n
The Colorado Chamber of Commerce also spoke out, arguing that providing such broad protections against noncompete agreements in the medical field could provide an open door to expanding them to other industries. Businesses have a vested interest in protecting important information and relationships.<\/p>\n
Blocking noncompete clauses on health care practitioners is where the public will most likely notice the new changes first. But there were several other key provisions.<\/p>\n
The salary threshold was $112,500 for noncompete agreements and $67,500 for nonsolicitation agreements prior to the new rules, which set a new and adjustable threshold to $127,091 for noncompetes and $76,250 for nonsolicitation agreements.<\/p>\n
About a fifth of Colorado workers make $100,000 or more a year in salary, so a minority of employees would be eligible for those. But more workers could fall under nonsolicitation agreements, given that the median wage for employed Colorado residents is around $58,000.<\/p>\n
One way some companies tried to get around the 2022 salary thresholds was by providing employees with stock options or other ownership interests in a company and then requiring noncompete clauses there, said Liz Hartsel, a partner at Denver-based Fortis Law Partners.<\/p>\n
For most lower-wage workers, the amount they received in equity was minimal compared to the potential losses in income they faced in being blocked from taking their job skills and knowledge elsewhere.<\/p>\n
To address that, the legislature created a formula to better protect minority owners owning less than half of a business by limiting how long they could be kept under a noncompete clause.\u00a0 An employee who averaged $100,000 a year over the past two years in wages and profit distributions and other payouts and who was set to receive $200,000 from the sale of the business could only be subject to a noncompete that lasted two years.<\/p>\n
For employees who are asked to sign noncompete agreements, Hartsel advises them to fight hard to obtain severance agreements that match whatever noncompete period they are being asked to take on. If an employer requires two years, then an employee should try to obtain two years of severance or equity awards worth that much.<\/p>\n
\u201cThere are a lot of lawsuits about noncompete agreements and there is a lot of confusion about what is or isn\u2019t enforceable,\u201d Hartsel said. Most cases are settled without being litigated, but even the threat of an action can prove psychologically and financially draining for someone trying to move on from a prior work relationship.<\/p>\n