[Transcript] Episode 504: Non-Compete Clauses in Group Practice

Evan Dumas 

You’re listening to Group Practice Tech, a podcast by Person Centered Tech, where we help mental health group practice owners ethically and effectively leverage tech to improve their practices. I’m your co-host, Evan Dumas.

 

Liath Dalton 

And I’m Liath Dalton, and we are Person Centered Tech.  

 

Liath Dalton 

This episode is brought to you by Therapy Notes. Therapy Notes is a robust online practice management and electronic health record system to support you in growing your thriving practice. Therapy Notes is a complete practice management system with all the functionality you need to manage client records, meet with clients remotely, create rich documentation, schedule appointments and bill insurance all right at your fingertips. To get two free months of Therapy Notes as a new Therapy Notes user go to therapynotes.com and use promo code PCT.

 

Evan Dumas 

Hello and welcome to Episode 504: Non-Compete Clauses in Group Practice.

 

Liath Dalton 

Oh yes, such a fun topic in the sense of, you know, dealing with legalese and contracts and how we put parameters around relationships, and what folks can do.Which, you know, on on one level, feels kind of contrary to what that what the general spirit and culture of that folks want to create in a practice, but then there’s business considerations that come into play. And oftentimes, if you’re working with an employment attorney who doesn’t understand a health care context, or mental health care ethics, they will have standard language that they want to have included for a non-compete clause. So there are considerations that are impactful for you as a group practice owner, and then for your team members.

 

Liath Dalton 

And we field a lot of questions about non-compete clauses and their enforceability and implications and so on. And there have been sort of regulatory and legal changes around these, on both a federal level and state level recently. And so we thought it would be a good time to talk about that all kind of in the context of the ever evolving and shifting regulatory landscape within which you are operating.

 

Liath Dalton 

So there are kind of two ways that non-compete causes function. One is often around, you know, limiting the ability to establish a business of the same type within a certain geographical distance. And that will include language as well related to taking employees of the hiring entity, right, of the employer. And then the other side of it relates to non compete with clients.

 

Evan Dumas 

Yeah.

 

Liath Dalton 

Now the ethics and legality and enforceability kind of diverge here in a healthcare context, for those two differing branches, right? So when it, let’s talk about the client side first, because this is kind of where things can get more emotionally difficult.

 

Evan Dumas 

Yeah, and it’s a little easier too.

 

Liath Dalton 

I think, but it’s also a clearer, clearer answer.

 

Evan Dumas 

Yeah.

 

Liath Dalton 

So the clients can’t be owned, right?

 

Evan Dumas 

Nope, not at all.

 

Liath Dalton 

And one of the fundamental principles of not just mental health care, but health care in general, is client and patient autonomy and choice and their right to work with the provider of their choice. So even if you have a non-compete clause related to clients, the enforceability of it is something that all of the healthcare attorneys that we have talked with have said is not going to be enforced. Possibly because it infringes on those client slash patient rights and their autonomy to choose the provider, and also can have a direct impact on their care outcomes, right?

 

Liath Dalton 

It may be that it is very important to their wellbeing to be able to continue to work with a particular provider who they have an established relationship with. So when questions around non-compete causes come up that pertain to clients, whether it’s coming from a group practice leader who has a departing clinician and they’re trying to figure out how to navigate the the client aspect of things, or from a clinician who is leaving either to start a solo practice or their their own group practice (and we’ve, over the years, seen both sort of instances occur), what needs to be centered is always going to be the client, right, and their their rights, and that is the ethical thing to do.

 

Evan Dumas 

Yeah.

 

Liath Dalton 

And also, if we’re talking about an unfortunate situation where things are contentious for whatever reason, wanting folks to know that in that regard, the enforceability is not something that you can rely on.

 

Liath Dalton 

And then also wanting there to be an awareness that, if you’re working with a purely, purely a employment attorney, that they won’t have necessarily an awareness of this. And so that’s important to bear in mind, especially when given boilerplate language, or if, and this is something we also see in practice, if you are using template language,

 

Liath Dalton 

So if it were to be something that you were actually pursue litigation around, the attorneys, the healthcare attorneys that we work with are saying that’s not something that is going to be enforceable. So be be mindful of that, or just, you know, have a an awareness of that, when you’re considering, first of all, whether to include that or not, and if that aligns with your sort of values and ethics as a practice owner in this bigger context of, kind of, client care and what sort of culture you want to be setting for your team, and how all of that reconciles with the cold, hard business considerations and realities.

 

Evan Dumas 

No, not at all.

 

Evan Dumas 

Oh yeah.

 

Liath Dalton 

that you’re you’re getting, you know, just from internet sources or from AI generation, we’re increasingly seeing that as well, right? And this is where we have to do the typical guidance of, anytime you are executing legal contracts, it is paramount to make sure that it reflects not just the applicable federal law, but also your specific state law, and sometimes, some instances, specific county or city,

 

Evan Dumas 

Oh, my.

 

Liath Dalton 

as well. So you really want to have it reviewed by a local attorney who has the right expertise to be giving you guidance on that, and when using template language, that can be a real pitfall.

 

Evan Dumas 

Yeah, it can.

 

Liath Dalton 

Where, where it doesn’t include those necessary particulars,

 

Evan Dumas 

Nope. 

 

Liath Dalton 

and therefore may not be enforceable, or may be completely counter to what the actual existing and applicable law is, right? And this was an interesting piece that came up recently in one of our Group Practice Office Hour sessions that was co-facilitated by the therapist attorney that we collaborate with, Eric Strom, which was that, as an attorney, it is typically far more efficient and therefore cost effective to provide the actual documentation directly.

 

Evan Dumas 

Yeah.

 

Liath Dalton 

Rather than to review, um, documentation that was sourced elsewhere and determine if it is applicable or not and address any gaps. And that’s something you know, that we actually see all the time. When folks say, I want to know if my policies and procedures, HIPAA security policies and procedures, are up to snuff? And if not, what, help me add what needs to be added.

 

Evan Dumas 

Yeah.

 

Liath Dalton 

And our response in that context always has to be, it’s actually a lot more efficient and effective if we’re providing that and supporting you in the process.

 

Evan Dumas 

Yeah.

 

Liath Dalton 

So just want to be kind of addressing that aspect of critical documentation and sourcing and how it can be most economical and efficient, and ensuring that it is actually reflecting your needs, your particular needs, and is going to be most protective for for your practice. Just as an aside.

 

Evan Dumas 

Yeah.

 

Liath Dalton 

So now, the other big piece that comes up with non-competes is related, as we said at the beginning, to the similar business type and the employee aspect. Like, if you’re taking employees or, and that’s, that’s where it can be enforceable.

 

Evan Dumas 

Yeah, it can. It can.

 

Liath Dalton 

Absolutely. But again, that is something that is very much dependent on state law.

 

Evan Dumas 

Yeah, yep.

 

Liath Dalton 

And certain states prohibit non-competes altogether. Others have income thresholds, where if a employee isn’t making what they deem a high compensation amount, then a non-compete is not permissible. And so if you’re in one of those states that has that, that permits non-competes but has an income threshold, it’s important to know what that income threshold is. And those update annually. Evan, do you want to give the quick little rundown of which states have the income threshold?

 

Evan Dumas 

Oh, let me pull that up. Yeah, totally, I had them all, a nice little list. So yeah, the federal thing did not go through. But thankfully, individual states did. So here, are the hit states where you should check. And sometimes these thresholds are non-compete and some of them are non-solicitation thresholds, income ones.

 

Evan Dumas 

So Washington, Colorado, Maine, Rhode Island, Oregon, Virginia and Washington, DC.And each of them had several thresholds switch over in 2025 and so, you know, sometimes the numbers are based on federal poverty rates, sometimes the numbers are based on the consumer price index. So, different in every state. But those states, again, are, I’ll read them in order that makes more sense, Washington and Oregon for our listeners, Colorado, Maine and then Rhode Island, Virginia and Washington, DC. So not very many states at all.

 

Liath Dalton 

In terms of the income threshold being determinative of whether or not it’s permissible or not, right? Yeah, and we will link to that list and further information that has the exact income threshold numbers in the show notes as well for you.

 

Liath Dalton 

And then we’ll speak a little bit to the whole federal component. Which is, there was an FTC rule that had passed and was going to go into effect, but then was overruled by a federal judge in Texas back in September of 2024. So that is not in effect and under the new administration, and therefore new agency leadership, the sort of general thinking, as as far as we understand it is that it is not likely that there will be further pursuance at this time of that ban. That the, sort of, current framework is oriented to employer benefits and deregulation, and less oriented toward protecting employees. That’s actually how a HR expert described it when, when this came up in a conversation that we were both in with group practice owners recently, so just describing that piece.

 

Liath Dalton 

So for now, that aspect of things is on hold, but in lieu of that going into effect on the federal level, we know that more states are likely to be explicitly taking it up as well.

 

Evan Dumas 

Mhm, yeah.

 

Liath Dalton 

So it’s important, again, as always, to be checking what your specific state law is with regards to that. And so there’s the again, non-compete and non-solicitation components. And I think those sometimes get used interchangeably when they aren’t in fact, interchangeable, right? So check out the show notes and the resources that we are putting there. And, you know, just be, be mindful of how you’re addressing this aspect, both in contract and and in conversation, and just sort of your own framing of it,

 

Evan Dumas 

Yeah.

 

Liath Dalton 

too. And again, with, with clients, I think the important thing to to center is their autonomy of of choice.

 

Evan Dumas 

Yeah, exactly.

 

Liath Dalton 

Even if that’s hard on the business sense, right? All right, so thanks for joining us. We hope you found this helpful, and we’ll talk to you next week.

 

Evan Dumas 

Yeah, talk to you next week, everybody.

 

Liath Dalton 

This has been Group Practice Tech. You can find us at personcenteredtech.com. For more podcast episodes, you can go to personcenteredtech.com/podcast, or click podcast on the menu bar.