The New Jersey State Supreme Court has ruled that a mental health professional; may not sign a contract that contains a restrictive covenant, better known as a noncompetition agreement. The Court ruled that it is not in the best interest of the client to not be able to continue with their psychotherapist if the clinician chose (or was asked) to leave their practice location. As such, as a matter of public policy the best interests of the clients would not be served by having such a restriction in place. Note this ruling does not extend beyond the State of new Jersey.

            Practice owners want to protect their bottom line and the financial health of their practices. As such it would make sense that they would want anyone joining their practice to sign such an agreement. After all, why bring someone into the practice, invest time, energy, and money into helping them develop a financially sound practice, and then have them leave and open up shop down the street. This investment may then seem to go down the drain.

            While this makes sense from a practice owner’s perspective, it makes no sense from any perspective (in my opinion) for a clinician to sign such an agreement. I believe that it usually done out of a sense of desperation when one feels they cannot build their own practice or that no other choices exist (or will exist). In signing such an agreement the clinicians: (a) compromise their own practice choices at some point in the future, and (b) compromise their therapeutic relationship with their client, should they ever want to leave the practice.

            How can it be in a client’s best interest for a clinician to sign a noncompetition agreement? It can’t. Clients build a therapeutic alliance with their psychotherapist. If a clinician decides they want to leave the practice (or are asked to leave the practice) it is a threat to the client’s autonomous decision-making ability in deciding whether or not to continue with the clinician. Fostering autonomy is one of the backbones of our ethical standards of practice.

            Please also remember that noncompetition agreements also remain in effect if the practice, for whatever reason, decides they no longer want the psychotherapist to practice with them. I have known cases where clinicians were asked to leave the practice and then immediately had no clients. Clinical and financial chaos soon followed. When signing a contract clinicians rarely think about the consequences of what happens if the practice arrangement does not work out well. So channeling my inner Taylor Swift please heed this advice, “Never, ever,…Never, ever” sign a noncompetition agreement. It only invites a disaster later on down the line.



Steven Walfish, Ph.D. is a Licensed Psychologist in Atlanta and a Partner at The Practice Institute (TPI). For more information on TPI go to Join our mailing list to learn more about activities and products to enhance both the clinical and business health of your practice. TPI offers two services that may be of interest to private practitioners: (a) contract review for those considering joining a group practice, and (b) a “Practice Analysis” to make sure that the business health of your practice is optimized.