Fight or Flight? Non-Compete Agreements in Physician Labor Markets

by: Michael Jones

Publication Date: November 22, 2019
Length: 12 pages
Product ID#: 5-662-525

Core Disciplines: Economics, Ethics, Leadership/Organizational Behavior, Strategy & Management

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Teaching Note

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Dr. Mario Zuccarello was the former chair of the Department of Neurosurgery at the University of Cincinnati (UC) and former vice chairman of the Mayfield Clinic’s board of directors. Years ago, he had signed a non-compete agreement with the clinic that prohibited him from working within 25 miles of any Mayfield Clinic office for two years after his employment with the clinic ended. After UC and the Mayfield Clinic terminated their affiliation agreement, Zuccarello planned to continue working with medical residents at UC. However, Mayfield sent a cease and desist letter indicating that Zuccarello was in violation of his non-compete agreement and ultimately a judge issued a temporary restraining order that prohibited Zuccarello from practicing medicine in the region.

This case explores justifications for implementing non-compete agreements in labor markets, including a phenomenon known as the hold-up problem. The case also provides a practical method of measuring market concentration and markets by calculating a location quotient (LQ).

Teaching Objectives

After reading and discussing the material, students should:

  • Understand the justification for non-compete agreements.
  • Identify costs and benefits of non-compete agreements.
  • Consider important economic issues before entering into a non-compete agreement.
  • Define a market by calculating a location quotient (LQ).