Dr. Lance Roasa joins the podcast to talk non-compete clauses! There has been a lot of attention recently on FTC proposed rule makings around non-compete agreements, and some are wondering what’s in the future for veterinarian contracts. Dr. Roasa weighs in on what’s going on and what we can expect in the future.
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LINKS
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ABOUT OUR GUEST
Dr. Roasa is a 2008 graduate of Texas A&M who has practiced in small animal, mixed animal and emergency settings and has bought, operated and sold over a dozen veterinary practices. He has completed a law degree from the University of Nebraska, is the past president of the American Veterinary Medical Law Association.
Dr. Roasa is a consultant for VIN and is a founder of Drip Learning Technologies, a veterinary continuing education provider. He also lectures in 13 veterinary colleges on the legal aspects of employment contracts, medical recordkeeping, veterinary malpractice and veterinary business as part of the curriculum. He serves as a national co-advisor to the Veterinary Business Management Association and regularly lectures to regional VBMA chapters and to the national association on the topics of growth, business metrics, and technology implementation.
Dr. Roasa also owns Santa Rosa Ranch, home to the largest registered Brangus cow herd in the United States.
EPISODE TRANSCRIPT
Dr. Andy Roark:
Welcome everybody to the Cone Of Shame Veterinary Podcast. I am your host, Dr. Andy Roark. Guys, I’m here with my friend Dr. Lance Roasa, who is a veterinarian and a lawyer, and he’s been on the episode or been on the podcast many times before. I always love talking about legal stuff with him. I love talking about what’s in contracts that veterinarians are signing and the practices they are using, and we are getting into non-compete agreements today. I’ve got a lot of questions. I feel like there are big seismic changes in non-compete language across the country and across different industries, and there is some FTC proposed rule changes that are shaping up. And I wanted to hear from Lance what those might look like and what he’s seeing in veterinary contracts. And that’s what we get into. So guys, if you got any interest at all in restrictive covenants, non-competes, non-solicitation agreements, non-service agreements, which are a thing we talk about, then this is a great episode for you. I hope you’ll enjoy it. I certainly did. Great, let’s get into this episode.
Kelsey Beth Carpenter:
(Singing) This is your show. We’re glad you’re here. We want to help you in your veterinary career. Welcome to The Cone Of Shame, with Dr. Andy Roark.
Dr. Andy Roark:
Welcome everybody to the Cone Of Shame Veterinary Podcast. I am your host, Dr. Andy Roark. Guys, I am here with my good friend, Dr. Lance Roasa. Lance, thanks for being here.
Dr. Lance Roasa:
Great to be here with you. Dr. Andy Roark. How are you today?
Dr. Andy Roark:
Man, I’m good. Summertime is here in South Carolina. It’s beautiful, but it’s hot. But that’s it for me. How about you?
Dr. Lance Roasa:
Same here. It’s exciting to be in spring. The kids are almost out of school. The teaching semesters, the veterinary schools are winding down, so it’s always a good summer.
Dr. Andy Roark:
So you do a lot of things, for people who don’t know, you do a lot of things like I do a lot of things and I’m like, “That guy does a lot of things.” You are a co-founder at drip.vet. Most people know drip.vet for the opioid education. And so I just recently took your two-hour opioid course. It’s the second time I took it. I took two years before that because I need it for my license every two years. And you had overhauled the whole thing. Nice work by the way. I was like, “I got to watch this thing again.” Nope, it’s all updated, refreshed, super good stuff. It felt very different. So props to you on that. But you also, you are hanging out on the VIN boards, drip.vet is part of the VIN family, and then you lecture all over the place of vet schools. Are you at 20 vet schools now? Something like that.
Dr. Lance Roasa:
Close to 20. Nobody’s really counting, but I think we’re at 18 or 20 vet schools, so I get to see a good percentage of the veterinary students as they enter their third year in veterinary schools. We talk about exciting stuff like the legal use of drugs and how to negotiate their contract and some stuff that I know that they’re just dying to hear about non-competes, which we’re talking about today. So that’s my job in the veterinary schools at this point.
Dr. Andy Roark:
All joking aside, people do get fired up about non-competes. You know what I mean? I am hearing a lot about it. It’s because of stuff going on with the FTC, but also a lot of vets are looking at their contracts. I think non-competes have become part of the battleground in recruiting. There are some big companies out there that have lots and lots of hospitals and they’re saying, “We don’t do non-competes.” And trying to use that as an advantage point in recruiting vets, things like that. I want to unpack this because this is an area where things are changing and people have a lot of interest. And so can you start to lay out for me traditionally what have non-competes kind of look like in veterinarian contracts?
Dr. Lance Roasa:
Sure. So I think to actually take a step back, let’s look at what non-competes kind of look like in society at large. And so in the American judicial system, so non-competes are centuries old. The case law in non-competes go back for literally hundreds of years. I mean even over as we borrowed a lot of our laws from England as we are breaking away as colonies. And so the battleground and the fight over non-competes in a business setting has been something that’s been going on for centuries. And so this is not a new debate, this is not a recent debate. This is the continuation of a long debate. Having said all of that, in veterinary medicine traditionally non-competes have been used sparingly through the sixties and seventies and eighties.
But really when practices starting going corporate, that’s when we really saw an explosion in the use of non-compete agreements. And so now at this point, nearly 99.9% of the practice of the contracts that I see contain a non-compete, especially from a state that will enforce a non-compete. And that brings up a really big point, is traditionally on the law side, non-competes are very, very state dependent, even to the point where they’re county or judge dependent. And we’ve got some states that will fully enforce non-competes and we’ve got some states, California is the biggest example, that will not enforce non-competes. And so you asked about where’s the legal standing, it’s really a state by state analysis to really understand what’s going on with non-competes. And traditionally that’s how it’s been forever.
Dr. Andy Roark:
I was reading recently that other professions have had non-competes kind of struck down. So attorneys and doctors, physicians I saw. And to me it seemed very much like a national thing. And the idea was having a non-compete might force people to break their relationship with their doctor if their doctor had to leave. Same thing with the attorney as you have a relationship with this attorney and then if they have a non-compete, they might be forced to leave, which would not allow you to maintain that relationship. And so the damage to that relationship was something that made sort of regulators say, in this industry these non-competes are not going to be acceptable. Am I getting that right? Is that across industries? Is that still state by state as well? Can you sort of speak to what that looks like?
Dr. Lance Roasa:
Yeah, you’re actually really close with that. It’s not necessarily-
Dr. Andy Roark:
Oh, good. I like to be at least in the neighborhood. That’s good.
Dr. Lance Roasa:
You’re definitely in the neighborhood. So on the legal side, it’s actually the legal ethics or what they call the professional responsibility will not allow attorneys to put other attorneys under a non-compete. And so it’s highly ironic that attorneys are asked to write non-competes for other professions, but they will not write a non-compete for their own profession. And the basis for that is exactly what you described, is it’s not a competition issue, it’s not a free market issue. It is the fact that the consumer of legal services in this case, their relationship would be highly damaged. And so if a lawyer leaves a law firm, then they’re welcome to take all the people that they served previously. On the physician side, what you’re referring to is some guidance that’s coming out from the AMA, the American Medical Association that says roughly the same thing. That physicians should not put other physicians under a non-compete for patient safety, for patient continuity, for the fact that that patients need to see a doctor continuously, not just the person that’s working at the hospital that day.
Dr. Andy Roark:
Yeah, that makes sense.
Dr. Lance Roasa:
Now, having said all of that, physicians and nurses and other healthcare providers are probably some of the people that are most affected by non-competes. So just because the AMA said, it does not mean that non-competes are somehow banned or not allowed in the human medical world.
Dr. Andy Roark:
Well, it’s interesting that you said doctors will not put other doctors under this. And I’m looking at the human medical world and I go, “Boy, there’s a lot of big corporations that own hospitals or medical groups or things like that.” Do they fall into that same category or is it something where you say, “Well no, these are not physicians putting other physicians, this is a different entity that’s getting physicians to sign a non-compete.” Is that different?
Dr. Lance Roasa:
It’s back to the corporatization world. And so it’s the fact that those hospitals that are truly employing those physicians are really corporations, honestly. So it looks a lot like if the AMA decided to put forth ethical guidance that said that veterinarians will not put veterinarians under non-competes. Well, a lot of hospitals are not owned by veterinarians. And so the AMA has no control over the corporate interests in our profession.
Dr. Andy Roark:
Interesting. Okay, all right. Lance, let’s start to talk about trends in the vet profession with non-competes. So I think back when I graduated about 15 years ago, non-competes were pretty standard and we were sort of instructed to pay attention to them. To pay attention to how much distance there was, how much time they would go for after you left your job, things like that. Have you seen a change or a trend in shrinking sizes, things like that? Or is it basically the same durations and distances that used to be, but they’re either in or out. So can you talk about general trends in that regard?
Dr. Lance Roasa:
Yeah, so there is a general trend on the legal side. So lawyers that write non-competes, to write them in the exact words are narrowly tailored. So to make them exactly what the protection of the business or practice in this situation needs. And so if you see a non-compete that is written by a lawyer that’s kind of studied on non-competes, they will try to write them in a very tailored way. And the reason for that is because they actually become more enforceable the smaller they are. Now you asked about timeframe, the timeframes still are almost always maxed out as what the law will allow. So some states, Florida, for example, 18 months, other states will presume that two years is reasonable. And so almost every practice and every lawyer that’s putting forth a non-compete is going to max out what the law will allow. The radius is very, very, very dependent on the practice locality, the practice type, et cetera.
The other thing that I really spend a lot of time teaching on, Andy, is what’s called the scope of practice. And so there’s three things to really look for. You’ve already mentioned the timeframe and the radius, but the third thing that is highly negotiable is the scope of practice. And so when you and I both graduated, there were a lot of mixed animal practices and there was an expectation that we would kind of do everything. But now practices are much more specialized. And so there’s day practices, they’re ER practices, there’s exotic practices, there’s small ruminate practices, there’s obviously equine practices. And so these non-competes that exempt all of practice, that’s a problem. And so what you see is practices start to say, “We’re only going to exempt daytime non-emergency practice.” Or, “Since we’re an ER practice, we’re only going to exempt competition in an overnight ER practice.”
And so the tighter that you can get that scope of practice allows that veterinarian to go on and do something else. But to answer your question, yes, these are constantly evolving. The other big thing that I see, that’s the difference when we graduated 15 years ago, is this use of the liquidated damages. And I think we’ve talked about this on a previous cone of shame podcast, but highly aggressive attorneys will write liquidated damages, which means that the damages are stipulated before you actually even breach the non-compete. And that’s a massive shift from what was in place 10 or 15 years ago. Non-competes are becoming more aggressive, but in certain situations they’re actually becoming more and more narrowly tailored.
Dr. Andy Roark:
If you dream of doing team training with your team, getting your people together, getting them on the same page, talking about how you guys work together in your practice, I’d love to help you. You can check out drandyroark.com and check out the store. I have two different team training courses. These are courses for teams to do together to get on the same page and to talk about how you do things. I have my angry clients course and I have my exam room toolkit course, and they are both available and there to come out. All right, guys, let’s get back into this episode. Well talk to me a little bit more about this calculating damages. So the stipulation that you’re calculating damages before the breach of the non-compete occurred, what does that mean, Lance? Help me get my head around that.
Dr. Lance Roasa:
Yeah. So usually there’s a provision that’s attached to the non-compete provision, which says something like, “If you breach the non-compete, the associate, the employee, or now former employee, will pay the practice.” And usually it’s a large sum of money, Andy.
Dr. Andy Roark:
Just a flat fee?
Dr. Lance Roasa:
Just a flat fee, a hundred thousand, $150,000 to breach the non-compete. And usually when a veterinarian sees that, they’re like, “Now wait a minute, I have to pay the practice money. I’m getting paid by the practice. I’ve got to pay the practice money back. So where’s this $150,000 coming from?” They’ll kind of throw a red flag and say, “Ah, this doesn’t feel right. $150,000 doesn’t seem right.” What smart lawyers have learned to do is write a per diem amount in lieu of a breach. And so they’ll say something like, “If you breach the non-compete, we’ll stipulate damages of a thousand dollars a day.” Well, if you breach the non-compete for 150 days, you’re at the same exact point, you’ve got to pay the practice $150,000. But to the veterinarian that’s skimming that contract and not really understanding the legal terms, they’re like, “Oh, a thousand dollars, whatever.” That doesn’t really draw the red flag like $150,000 line item in that contract. So it’s a way to sneak these liquidated damages provisions past associate veterinarians and get that signature.
Dr. Andy Roark:
All right. So that makes sense. I was actually surprised when you said early on that 90% of the contracts that you see still have non-competes in them.
Dr. Lance Roasa:
I would say 99.
Dr. Andy Roark:
Really?
Dr. Lance Roasa:
Yeah, no [inaudible 00:15:01].
Dr. Andy Roark:
I felt like I felt like we were moving away from that. I was hearing more and more people saying, “Oh yeah, we’re not doing those anymore.” But you’re not seeing that on the ground. Is that correct?
Dr. Lance Roasa:
No, there’s a couple of large practices that have moved away from non-competes, but overall the vast majority of practices still use non-competes. There’s a couple of commentators that have written and talked about abolishing non-competes or getting the profession away from non-competes, but I have to be honest, that’s just talk. I mean, in the real world, I’m not seeing it change at all.
Dr. Andy Roark:
No, that totally makes sense. Talk to me about what’s going on at the national level. So there was sort of FTC proposed rule makings that were sort of in the headlines recently and people were talking about some of the Biden administration’s thoughts on non-competes and stuff. Talk to me about sort of what’s going on there.
Dr. Lance Roasa:
It was a pretty boring read overall, but what it does is it attempted to make the case that the FTC does have the ability to regulate non-competes across the entire country. And basically it said that the FTC is thinking about banning non-competes on a federal level. Now the thing that I really want to point out here is, is this is an extremely slow process when we’re going through what’s called the Administrative Procedures Act. What the FTC did is they opened a notice in comment period, and they allowed the American people and business interests to come and weigh in. The FTC will gather all those comments, read them all, and then ultimately deliberate internally on whether or not they want to proceed with some sort of actual rulemaking. And so generally speaking, this stuff takes years, if not decades to fully come to fruition.
And really what I saw when the Biden administration first issued, “Hey, FTC, do something about this.” And then in January of 23 when the FTC actually released this notice or this proposed rulemaking, I got a lot of comments just right off the bat. And actually a lot of anecdotal comments like, “Hey, these non-competes, they’re going to go away and I don’t have to worry about this anymore.” And I’m like, “Whoa, whoa, whoa, pump the brakes. This is really a time to hold your horses. Do not sign a non-compete with the expectation that the FTC is going to do something to nullify it. You’ve got to still negotiate it. You’ve still got to understand what it’s going to affect, how it’s going to affect your personal life if they don’t do something about it.” So it’s good that the FTC is giving this a look. It’s good that it’s getting some light shined on it, but it doesn’t mean that we can ignore non-competes any time for the foreseeable future.
Dr. Andy Roark:
Yeah. What do you think the future’s going to be like in non-competes? When I go sign a vet contract five years from now, do you think it’s going to look different as far as non-competes go? If you had to bet, what would your bet be?
Dr. Lance Roasa:
So we’re seeing a push across many states to actually change. And so I think that the state level has much more potential to actually change the enforceability of non-competes overall. Ultimately too, Andy, it depends a lot on the market for veterinary services. And so you mentioned earlier you’re seeing some people start to talk about it and a few companies start to say, “We’re not using non-competes.” If it truly does work out to be a recruiting tool and hasn’t necessarily so far, but if it truly does work out to be a recruiting tool, then you’ll see other companies follow suit. And so it depends on the state that you’re in. It depends on the company that you’re looking at overall. But I see non-competes sticking around for a little bit longer.
There’s a really big point that I want to make here when you’re looking at that contract though, and pardon my football analogy here, but my brain often thinks in football terms. But non-competes in my mind, in my legal mind, are really the running backs of the football team. They’re the ones that get their picture in the paper. They’re the ones that everybody talks about. They’re the ones that little kids remember the stats and all that stuff. But in reality, when it comes to lawsuits and when it comes to actually enforcing a contract, it’s the non-solicitation that really counts. And so I do want to point out that the states and the FTC and even these companies that we’re referring to, they’re talking exclusively about non-competes and doing away with non-competes.
However, no one, including the state of California, is talking about doing away with non-solicitation agreements. And so even if we do have some guidance or some rulemaking by the FTC within five years, Andy, that contract that you’re looking at in the future will likely have a non-solicitation. And that non-solicitation still is very prohibitive from being able to go and practice somewhere else. In fact, it can be argued that it’s more prohibitive because it doesn’t have a radius on it. Wherever those clients follow you, you can run into some issues. So what I’m saying is this is not an area of the law that’s going to go away anytime soon.
Dr. Andy Roark:
So my perception of non-solicitation agreements had always been like, “Okay, you can’t market or promote to clients.” If I’m leaving and I go somewhere else across town, what constitutes solicitation in most cases, Lance? Like if I just go there and start practicing, am I good? Or is it a problem if clients follow me over there? Help me sort of parse that.
Dr. Lance Roasa:
Yeah, there actually is a big distinction in what you’re referring to there. So the distinction that we’ve got to make is the difference in a non-solicitation provision and what the second would be a non-service or a non care provision. So two different action verbs, but a lot of times they get wrapped under the provision that is a non-solicitation. Now if you look back 10 or 15 years, they were all non-solicitation provisions, but as lawyers in veterinary medicine got more sophisticated, they started drafting these non-service provisions. And so back to the distinction between the two, the verb solicit or to solicit would mean exactly what you said, a targeted marketing, a targeted advertising. And keep in mind on the word targeted.
And so if the traditional word is, or the traditional action would be you’re going to pick up the phone and call someone, or maybe you run into an old client in the grocery store and you say, “I was at practice ABC, now I’m at practice XYZ. You should come see me there.” That is an active solicitation. Sending out a list to an email list to people that you knew that were clients. “Hey, come see me at practice XYZ.” That is a targeted marketing, and that is contrasted to if the contract has a non-service provision in it. And the way that those are usually worded is they’ll say something like, “The veterinarian shall not solicit or render services to a former client.” And so meaning that under a technical reading and also an enforceable reading of that, you could be standing in the exam room waiting for your 3:30 appointment, 3:30 appointment comes into the exam room, “Oh, Ms. Jones, I saw you over at a ABC Veterinary Hospital.”
That would be a technical violation of that non-solicitation/non-service provision. So I’m seeing more and more of these non-service provisions written in contracts, and it really takes a fine reading to understand the difference. But I think you can see how quickly a veterinarian could get wrapped up into a non-service provision. So my mind always goes to how do we combat this? How do we negotiate this? Well, number one, know the difference between the two and number two really work to get that non-service provision stricken out of the contract. Keep in mind, Andy, all of these are super negotiable. You just have to know what you’re looking for and how to ask for it taken out.
Dr. Andy Roark:
Yeah, no, that totally makes sense. Usually when you’re close to signing a contract and you’re excited to go there and the practice is excited to have you, that’s the time to bring up the non-compete and say, “Hey, this is kind of a headache here.” But it’s a whole lot harder to get out of it later on.
Dr. Lance Roasa:
Oh, absolutely. The time to negotiate these are before you get into them. I mean, this is a very important point. A lot of people that I work with, they say, “Hey, can you unwind this non-compete? I heard they’re unenforceable.” And it’s like, “No, we should have talked about this, you should have talked about this before we signed this.” That is the time that you have the leverage when you’re leaving a job. It’s like breaking up. I mean, it’s like a divorce, right? Nobody wants to be amicable during a divorce and it’s really hard to negotiate them then.
Dr. Andy Roark:
Yeah, no, that totally makes sense. Lance, thanks so much for being here. Thanks for talking all this through with me. I really appreciate it. I was blown away. The non-service agreement, I had not even considered that. That’s something that I think it’s amazing. I can’t believe that that’s something that’s increasing in its commonality. Anyway, so thanks for bringing it up. Where can people find you, drip.vet, if they’re fascinated by the legal aspects of our profession, if they need a little legal advice and they’re in practice, where can they reach you?
Dr. Lance Roasa:
Sure. So I hang out over on the VIN boards, on the regulatory and legal boards, and also on the practice management boards. I’m one of the consultants on those boards. And so if you’re a VIN member already, you can receive… we can talk about these things and obviously weigh in from other attorneys, and we answer a lot of questions over on those boards. Otherwise, I’m also at drip.vet, and so have a ton of legal continued education over there, classes on negotiation, on contracts. We go into deep dives on all of this stuff. And then if you are truly interested in it, and unfortunately, most of the people that I work with have already been burned by a non-compete. So it’s not too interesting as a student, it’s not too interesting in your first job, but you get burned by that paragraph and then it’s time to start paying attention.
Dr. Andy Roark:
Absolutely, awesome. Well, thanks for being here. Guys, thanks for tuning in. Thanks for listening. We’ll talk to you soon. And that is our episode. Guys, I hope you enjoyed it. I hope you got something out of it. As always, if you did, the kindest thing you can do is leave me an honest review online, wherever you get your podcast. Tell your friends, share the word, help other people find the podcast work that we’re doing here. Anyway, that’s all I got. Gang, take care of yourselves. Be well. Talk to you later. Bye.
