In the unpublished appellate court case of Valley Medical Center V. Schoos, the Court of Appeals of Washington upheld a trial court's decision to enforce a covenant not to compete against a physical therapist. The trial court had ruled that the therapist had forfeited the amount of $ 180,000 that was owed to him as liquidated damages. The trial court had also awarded the hospital district prejudgment interest and its attorney fees and costs.

On appeal, the therapist argued that the trial court erred in: (1) granting partial summary judgment regarding the enforceability, interpretation, and violation of the non-compete clause; (2) upholding the provision for liquidated damages contained within the non-compete clause; (3) determining that prejudgment interest was available on the liquidated damages amount; and (4) awarding attorney fees to the hospital district.

The Court of Appeals held that the trial court properly determined that the non-compete clause was reasonable and that the therapist violated it as a matter of law. There was no substantial dispute about the reasonableness of the covenant not to compete. Whether a covenant not to compete is reasonable involves a consideration of three factors: (1) whether restraint is necessary for the protection of the business or goodwill of the employer; (2) whether it imposes upon the employee any greater restraint than is reasonably necessary to secure the employer's business or goodwill; and (3) whether the degree of injury to the public is such loss of the service and skill of the employee as to warrant nonenforcement of the covenant.

The appellate court further agreed with the trial court that the liquidated damages in the amount of $ 180,000 was a reasonable pre-estimate made at the time of the contract and was not unconscionable. The award of prejudgment interest was proper, as was the award of attorney fees and costs.

This case is unpublished so its use as precedent is limited.  However, it does demonstate that covenants not to compete can be upheld against health care providers in the state of Washington when the right facts and circumstances are present.

Mitch Broz and Tom Pedreira both work with physicians and other health care providers on contracting issues, including covenants not to compete.