The Myth of the “Non-compete” Agreement

A non-compete agreement is a common feature of a purchase contract between dentists selling and buying a practice. It’s a legal thing, and remember that I’m an accountant, not a lawyer. You should always ask your attorney for specific advice relating to your situation. That being said, I can still bust a common myth about them.

If you want more information, there’s a great episode of DSO Decision, a new podcast from me and my attorney friend Michael Cohen, all about non-competes. The info here is good whether you’re involved with a DSO or not. Listen to it here:

What is a non-compete agreement?

“Non-compete” agreements are also called “restrictive covenants.” It’s when two parties agree not to compete with each other’s business in a specific way, or in a specific area, or for a specific amount of time—or all three.

Are they a thing for dentists?

Yes, very much. If you purchase a dental practice, you may have a non-compete clause in the agreement that prevents the seller from turning around and opening or buying another practice and competing with you directly. As a buyer, you wouldn’t want that—and you want the agreement here to be airtight, so your attorney will draft that clause for you.

MYTH: They’re not enforceable, right?

This isn’t right, although I see it pop up in online dental groups all the time. Usually they are enforceable. There MAY be times when a specific agreement isn’t enforceable, but you, as a dentist and a non-lawyer, shouldn’t make that assumption. And that goes for me too! That’s why I always, always, recommend that buyers have an experienced dental acquisitions attorney in their corner.

You’ve probably heard the myth that they’re not enforceable because the tech industry is in the news a lot, and there have been some high-profile legal situations in that industry. But you are a dentist buying a business, not an engineer switching from Google to Facebook. The legal rules for you are WAY different than what you may have read about on Reddit. Don’t fall for the online scholar’s advice that these are not enforceable for you.

Now I’ll back away gingerly from this legal topic. I’ll just say that there’s plenty of nuance here, every dentist, every state, every situation will have its own contours. So once again: please hire an experienced dental acquisitions attorney. Need a recommendation? I’ve got plenty of those! Just give me a call.