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Thoughts on Central Indiana Podiatry, Non-Competes, Garden Leave, and Physician Employment Contracts

Having finally posted on Central Indiana Podiatry v. Kenneth Krueger, I wanted to write on some points tangential to reporting on the particular case but which might I see bearing directly on physician employees. I think this case - and every similar case - may have been better served with a garden leave provision.

I have been working on a post on garden leave. For now let me use this definition from Wikipedia (it states with succinctness what I have read in more scholarly sources):

Garden leave comes to us from the United Kingdom and has not yet made much of inroad into our law.

Why should such a concept work with physician employees?

1. In Central Indiana Podiatry, there was an employee contract.
2. Unlike salesmen contracts, there was a salary provision.

I suggest also reading my Noncompetition Agreements: Lexington Clinic sues former director and the case described there. I may overreach with my extrapolations regarding salaries and employment contracts but then my presumptions do not apply to those exceptions.

I see non-compete agreements where the employee is not working for a set term (therefore, no period for the garden leave to operate within) and/or is working on a commission basis (therefore, cannot establish an amount to be paid during the leave). Flipping around the problems, I say there is an opportunity with cases like Lexington Clinic and Central Indiana Podiatry.

I will speculate a bit further now about two other benefits I see garden leave having over a non-compete agreements.

First, I think a garden leave provision alleviates but probably does not remove the ethical concerns raised in Central Indiana Podiatry (and which have been raised elsewhere - see my post Non-compete Agreements - The Medical Field) about non-compete agreements.

Secondly, I cannot help but think that the costs of a gardening leave provision pale in comparison with the costs of a non-compete agreement. I see the costs of a gardening leave provision as being the cost of drafting the agreement plus the wages and benefits paid to the employee during the leave period. Compare that with the costs of a non-compete agreement in Central Indiana Podiatry: drafting the agreement, litigating the agreement, and losing because in Indiana non-compete agreements turn on the facts of each case. I expect the costs for litigating Central Indiana Podiatry exceeded $150,000.00 and would not be surprised if they reached even higher.

Downside? Using a tool new to Indiana is the first one coming to mind. That garden leave will not serve as a panacea for all cases.

As I see it, our law on non-competition agreements grew out of English law. Adopting garden leave from the English may be even easier - garden leave lacks the explicit harshness of restraining a person's trade.

As for being a panacea, nothing ever solves all of our problems. The true test for garden leave lies in whether this tool provides better benefits than non-competition agreements.

Full post as published by Indiana Civil & Business Lawyer on April 06, 2008 (boomark / email).