Your employment agreement, read for the exit: the clauses that decide

Which clauses decide what leaving costs

Five clauses do most of the work. The restrictive covenant, the notice and termination provisions, any money advanced to you that has to be repaid or forgiven, the allocation of tail malpractice coverage, and the survival list naming what outlives the agreement. The rest of the contract governs a job you are ending. Those five govern the practice you are starting, and they keep operating after your last clinic day.

Which of the five binds you varies by state, and the swings are not small. As of Sept. 1, 2025, a Texas covenant against a physician is capped at a five-mile radius from where they primarily practiced and has to expire within a year of termination, and the same law newly reaches dentists, nurses and physician assistants 1Ref 1Texas Legislature, 89th Regular Session (2025).S.B. No. 1318 — An Act relating to restrictions on covenants not to compete for physicians and certain health care practitioners.The Sept. 1, 2025 Texas limits on a physician covenant (five-mile radius from the primary practice location, expiry within a year), the buyout capped at the physician's total annual salary and wages at termination, the patient-list and records-access carve-outs, the void-if-involuntarily-discharged-without-good-cause rule, and the extension of the statute to dentists, nurses and physician assistants.. In Colorado, a covenant between physicians that restricts a physician's right to practice medicine on termination is void 2Ref 2Colorado General Assembly (2022).House Bill 22-1317 — Concerning Restrictive Employment Agreements (amending C.R.S. § 8-2-113).Colorado's void rule for a covenant between physicians restricting the right to practice medicine on termination, the survival of other enforceable provisions including damages tied to the termination, the notice requirement for a covenant otherwise permitted by the statute (to a prospective worker before the worker accepts the offer of employment, or to a current worker at least fourteen days before the earlier of the covenant's effective date and the effective date of any additional consideration), the penalty of up to $5,000 per worker or prospective worker harmed by the conduct and the court's discretion to reduce or waive it for good faith, and the act's application to covenants entered into or renewed on or after its effective date..

Start with the governing-law sentence, usually near the signature block: it names the state whose answer applies to you. Write that state down, then read the covenant beside its statute.

Read the covenant against your state's statute

Your state's statute is the test, and the paragraph in your contract is a proposal about what that statute will allow. Four states show the range: Texas caps distance and duration and requires a buyout price; Colorado voids a covenant between physicians outright; Maryland turns the question on total annual compensation; Massachusetts caps the restricted period and requires the agreement to be supported by garden leave or other agreed consideration.

A cap is not a release. Maryland's ceiling leaves patient-list and proprietary-information protections untouched 3Ref 3Maryland General Assembly (2025).Md. Code Ann., Labor and Employment § 3-716 (restrictive employment agreements — health care and veterinary workers).Maryland's rule voiding a non-compete against a direct-patient-care health worker at or below $350,000 in total annual compensation, the one-year and 10-mile cap that applies above that figure, and the fact that the cap leaves patient-list and proprietary-information protections untouched. The section's effective date was not confirmed in the fetched statute text., and Massachusetts lets the restricted period run as long as two years, rather than twelve months, only where the employee breached a fiduciary duty or unlawfully took employer property 4Ref 4Massachusetts General Court (2018).Massachusetts General Laws Part I, Title XXI, Chapter 149, Section 24L (Noncompetition Agreement Act).The Massachusetts 12-month cap on a noncompetition agreement's restricted period, its extension to two years only for a fiduciary-duty breach or an unlawful taking of employer property, the requirement that the agreement be supported by a garden-leave clause of at least 50 percent of the employee's highest annualized base salary paid within the two years preceding termination or by other mutually agreed consideration named in the agreement, and the absence of a health-care-specific carve-out in the statutory text.. Massachusetts also requires the agreement to be paid for: a garden leave clause of at least 50 percent of the employee's highest annualized base salary paid in the two years before termination, prorated across the restricted period, or other consideration the parties mutually agree on and name in the agreement 4Ref 4Massachusetts General Court (2018).Massachusetts General Laws Part I, Title XXI, Chapter 149, Section 24L (Noncompetition Agreement Act).The Massachusetts 12-month cap on a noncompetition agreement's restricted period, its extension to two years only for a fiduciary-duty breach or an unlawful taking of employer property, the requirement that the agreement be supported by a garden-leave clause of at least 50 percent of the employee's highest annualized base salary paid within the two years preceding termination or by other mutually agreed consideration named in the agreement, and the absence of a health-care-specific carve-out in the statutory text.. Its text carries no health-care carve-out 4Ref 4Massachusetts General Court (2018).Massachusetts General Laws Part I, Title XXI, Chapter 149, Section 24L (Noncompetition Agreement Act).The Massachusetts 12-month cap on a noncompetition agreement's restricted period, its extension to two years only for a fiduciary-duty breach or an unlawful taking of employer property, the requirement that the agreement be supported by a garden-leave clause of at least 50 percent of the employee's highest annualized base salary paid within the two years preceding termination or by other mutually agreed consideration named in the agreement, and the absence of a health-care-specific carve-out in the statutory text..

Texas runs the other way on the patient question. Its covenant has to leave the physician access to a list of the patients they saw or treated within one year of termination, and access to those patients' medical records on the patient's authorization, and it has to provide a buyout of the covenant capped at the physician's total annual salary and wages at termination 1Ref 1Texas Legislature, 89th Regular Session (2025).S.B. No. 1318 — An Act relating to restrictions on covenants not to compete for physicians and certain health care practitioners.The Sept. 1, 2025 Texas limits on a physician covenant (five-mile radius from the primary practice location, expiry within a year), the buyout capped at the physician's total annual salary and wages at termination, the patient-list and records-access carve-outs, the void-if-involuntarily-discharged-without-good-cause rule, and the extension of the statute to dentists, nurses and physician assistants.. Ask for that figure in writing and check it against the statutory cap.

Maryland's section is the one to date yourself: confirm on the statute page when it took effect, and write down the day you read it. But if your state is not one of those four, start where the answer usually sits: the labor and employment title of your own code, or the health occupations title, searching for covenant not to compete. Some states answer this by statute and some leave it to case law, and establishing which one yours is comes first.

Two documents people cite that will not decide your case

Two documents circulate constantly in this conversation, and neither is the enforceability test a court in your state will run: the Federal Trade Commission's Non-Compete Clause Rule, published in 2024 with a planned effective date of Sept. 4, 2024 and a carve-out leaving already-signed senior-executive covenants in force 5Ref 5Federal Trade Commission (2024).Non-Compete Clause Rule.The existence, exact title and citation of the 2024 rule, its planned Sept. 4, 2024 effective date and its senior-executive carve-out, used to explain why a reader should date and verify the rule's status rather than treat it as the test governing their covenant., and the American Medical Association's ethics opinion on restrictive covenants, which is a professional standard 6Ref 6American Medical Association, Council on Ethical and Judicial Affairs (2016).Opinion 11.2.3.1, Restrictive Covenants.The AMA's ethical standard that a restrictive covenant should not unreasonably restrict how long or where a physician may practice after leaving and should make reasonable accommodation for a patient's choice of physician, presented as a professional standard rather than a state enforceability test..

The Commission's rule sits in the Federal Register at 89 FR 38342 as 16 CFR Part 910, carrying that September 2024 effective date on its face 5Ref 5Federal Trade Commission (2024).Non-Compete Clause Rule.The existence, exact title and citation of the 2024 rule, its planned Sept. 4, 2024 effective date and its senior-executive carve-out, used to explain why a reader should date and verify the rule's status rather than treat it as the test governing their covenant., which is why it needs a date attached every time it is repeated. Whether it operates today is not something the published rule can tell you. Open the Federal Register document, read its current status, and write down the day you checked.

The AMA opinion serves a different purpose. It says a restrictive covenant should not unreasonably restrict how long or where a physician may practice after leaving, and should make reasonable accommodation for a patient's choice of physician 6Ref 6American Medical Association, Council on Ethical and Judicial Affairs (2016).Opinion 11.2.3.1, Restrictive Covenants.The AMA's ethical standard that a restrictive covenant should not unreasonably restrict how long or where a physician may practice after leaving and should make reasonable accommodation for a patient's choice of physician, presented as a professional standard rather than a state enforceability test.. That is language a negotiation can borrow. An employer is free to decline it, and a court is under no obligation to apply it.

The money that follows you out the door

Three lines carry the cash with you. The first is any forgivable signing, relocation or tuition loan, whose unforgiven balance typically comes due when a clinician leaves early. The second is a repayment obligation for training, licensing or credentialing costs the employer fronted. The third is the tail malpractice endorsement, which the agreement assigns to one side or splits. Two of the three are priced by your departure date, so read them before you pick one.

Canceled or forgiven debt is generally taxable income to the recipient in the year it is canceled, and the canceling party generally reports it on Form 1099-C, with named exceptions set out in the tax topic itself 7Ref 7Internal Revenue Service (2026).Topic no. 431, Canceled debt – Is it taxable or not?.The general federal rule that canceled or forgiven debt is taxable income to the recipient in the year it is canceled, reported on Form 1099-C, with named exceptions, applied to an employer's forgiveness of a signing, relocation or tuition advance., which generally makes a forgiven signing bonus taxable to you. A negotiated release of the balance and a straight repayment are two different numbers. Run both with your CPA before the resignation date is set.

Who buys the extended reporting endorsement is a private allocation, settled only in the sentence in front of you. Common drafting ties it to who ended the agreement and why, one more reason to read the termination definitions closely. Benefits stop on their own schedule too, and replacing employer health coverage is a separate decision with deadlines of its own.

How the departure is characterized can void the clause

In Texas, a covenant against a physician is void and unenforceable if the physician is involuntarily discharged without good cause tied to their own conduct or performance, so the label on the exit is itself a term with consequences 1Ref 1Texas Legislature, 89th Regular Session (2025).S.B. No. 1318 — An Act relating to restrictions on covenants not to compete for physicians and certain health care practitioners.The Sept. 1, 2025 Texas limits on a physician covenant (five-mile radius from the primary practice location, expiry within a year), the buyout capped at the physician's total annual salary and wages at termination, the patient-list and records-access carve-outs, the void-if-involuntarily-discharged-without-good-cause rule, and the extension of the statute to dentists, nurses and physician assistants.. Colorado attaches consequences to the employer's paperwork instead: a covenant otherwise permitted by that state's statute is void unless notice of it and its terms reached the worker in a separate, signed document, for a prospective worker before they accepted the offer of employment, and for a current worker at least fourteen days before the earlier of the covenant's effective date and the effective date of any new consideration for it 2Ref 2Colorado General Assembly (2022).House Bill 22-1317 — Concerning Restrictive Employment Agreements (amending C.R.S. § 8-2-113).Colorado's void rule for a covenant between physicians restricting the right to practice medicine on termination, the survival of other enforceable provisions including damages tied to the termination, the notice requirement for a covenant otherwise permitted by the statute (to a prospective worker before the worker accepts the offer of employment, or to a current worker at least fourteen days before the earlier of the covenant's effective date and the effective date of any additional consideration), the penalty of up to $5,000 per worker or prospective worker harmed by the conduct and the court's discretion to reduce or waive it for good faith, and the act's application to covenants entered into or renewed on or after its effective date..

Colorado also attaches a price to the employer's mistake. An employer that presents a worker with a covenant void under the statute is liable for actual damages and a penalty of $5,000 per worker or prospective worker harmed by the conduct, and a court may award less, or no penalty at all, only where the employer shows it acted in good faith on reasonable grounds for believing it was not in violation 2Ref 2Colorado General Assembly (2022).House Bill 22-1317 — Concerning Restrictive Employment Agreements (amending C.R.S. § 8-2-113).Colorado's void rule for a covenant between physicians restricting the right to practice medicine on termination, the survival of other enforceable provisions including damages tied to the termination, the notice requirement for a covenant otherwise permitted by the statute (to a prospective worker before the worker accepts the offer of employment, or to a current worker at least fourteen days before the earlier of the covenant's effective date and the effective date of any additional consideration), the penalty of up to $5,000 per worker or prospective worker harmed by the conduct and the court's discretion to reduce or waive it for good faith, and the act's application to covenants entered into or renewed on or after its effective date.. The notice requirement and the penalty reach covenants entered into or renewed on or after the 2022 act's effective date, and the physician void rule predates them 2Ref 2Colorado General Assembly (2022).House Bill 22-1317 — Concerning Restrictive Employment Agreements (amending C.R.S. § 8-2-113).Colorado's void rule for a covenant between physicians restricting the right to practice medicine on termination, the survival of other enforceable provisions including damages tied to the termination, the notice requirement for a covenant otherwise permitted by the statute (to a prospective worker before the worker accepts the offer of employment, or to a current worker at least fourteen days before the earlier of the covenant's effective date and the effective date of any additional consideration), the penalty of up to $5,000 per worker or prospective worker harmed by the conduct and the court's discretion to reduce or waive it for good faith, and the act's application to covenants entered into or renewed on or after its effective date..

So the dates belong on the inventory next to the covenant: the day it was handed to you, the day you signed it, and the day it took effect. Offer-letter emails and the signature page are where they live. For a covenant signed at hire, the test is whether notice reached you before you accepted the offer. For one presented after your start date, and entered into or renewed since 2022, Colorado's fourteen days run from the notice to the earlier of the covenant's effective date and the date of any new consideration, and a shorter gap is the first thing employment-law counsel will ask about 2Ref 2Colorado General Assembly (2022).House Bill 22-1317 — Concerning Restrictive Employment Agreements (amending C.R.S. § 8-2-113).Colorado's void rule for a covenant between physicians restricting the right to practice medicine on termination, the survival of other enforceable provisions including damages tied to the termination, the notice requirement for a covenant otherwise permitted by the statute (to a prospective worker before the worker accepts the offer of employment, or to a current worker at least fourteen days before the earlier of the covenant's effective date and the effective date of any additional consideration), the penalty of up to $5,000 per worker or prospective worker harmed by the conduct and the court's discretion to reduce or waive it for good faith, and the act's application to covenants entered into or renewed on or after its effective date..

The reading pass, in order

Work through the agreement once with a pen and one question at every paragraph: does this survive my last day? Five passes produce an inventory that fits on a single page. Do it before you give notice, because how the departure happens changes which clauses bite and which fall away, and the notice itself is one of the things the contract defines.

1. Find the governing-law sentence, then the statute. Open that state's official code lookup and search its labor and employment and health occupations titles for covenant not to compete. Colorado's sits at Section 8-2-113 of its revised statutes, Maryland's at Labor and Employment Section 3-716, Massachusetts at Chapter 149 Section 24L. 2. Date the covenant twice. Once for the day it was presented, once for the day it was signed. 3. Price the exit. Add the unforgiven loan balance, any repayment obligation, the tail endorsement, and the buyout where your statute allows one. 4. Mark the survival list. Confidentiality, non-solicitation and indemnification are commonly drafted to outlive the term, but which ones do is a choice made in your own document. 5. Write the counsel triggers you found. A buyout you cannot reconcile with the statutory cap, a forgiveness schedule that does not match the ledger, a departure the employer may characterize as for cause, and any question about what happens if the practice is sold.

The same reading works on the first vendor agreement for the new practice, where the rule is to read the exit before the demo, and on the first payer agreement, where reading a payer contract sets what you are paid. If the new practice charges patients directly, the direct agreement you write next carries required terms of its own. Write the paragraph numbers beside each trigger; counsel bills for finding them.