RESTRICTIVE COVENANTS

Wichita Clinic, P.A. v. Louis, No. 97, 495 (Kan. Ct. App. June 13, 2008)

The Court of Appeals of Kansas held that a restrictive covenant contained in an employment agreement between a medical clinic and a doctor was enforceable and the clinic was not precluded from claiming specific performance even though it previously breached the employment agreement. The court found that the restrictive covenant was reasonable and enforceable because the clinic had a legitimate business interest in its referral system, patient base, and goodwill. Further, the three-year time and within county practice restrictions were reasonable time and territorial restrictions which were not injurious to the public welfare. Also, the restrictive covenant was not an undue burden on the doctor because it did not prevent her from practicing medicine anywhere – only in the county where the clinic was located.

The court also determined that the contract's liquidated damages provision, calling for 25 percent of all earnings collected for the next three years, was enforceable because it was reasonably related to the actual injury caused by the doctor's breach.

Finally, the court found that the clinic breached the employment agreement earlier by charging the physician for "direct-help extenders" when the original contract indicated that the clinic would "assume those related expenses with the doctor's practice." However, the doctor was not relieved from performance under the restrictive covenant because there was evidence that she knew of the modifications which constituted the breach and accepted them.