"No-hire" clauses in healthcare sector contracts: their use and enforceability

In today's healthcare industry, many hospitals utilize outside agencies for both business and clinical functions. This Article acknowledges the prevalence of outsourcing contract labor in the healthcare arena and focuses on the restrictive provisions included in these employment contracts, particularly "no-hire" clauses. No-hire clauses are often included in contracts between healthcare providers and professional groups that provide clinical service employees to the provider, such as a medical practice group providing physicians to a hospital or an agency providing nurses to a nursing home. These clauses usually provide that the healthcare provider may not directly hire an employee provided by the professional group, nor may it contract with another professional group that later hires the employee. The purpose of a no-hire clause is two-fold: to protect the professional group's investment of time and moneyfor recruiting, training, and establishing the employee's clinical practice, and to give the professional group leverage to retain its employees. While noncompete clauses in employment contracts have traditionally been the subject of litigation, no-hire clauses raise distinct legal issues. Case law provides conflicting views as to the enforceability of these provisions. Some courts find no-hire clauses to be per se illegal restrictions on trade, while others will permit them when they are reasonable within a specific context. The author proposes that a multifactor test be applied on a case-by-case basis to determine the reasonableness of the no-hire provision in a given employment contract and suggests drafting improvements to facilitate enforcement.