When a Counselor/Therapist Leaves an Agency After Signing a Non-Compete Agreement

By Floyd Else, MA, LMHC, NCC, Webmaster

"I recently left a job with a mental health agency, and am in the process of building my new private practice. I recently received a call from a former client whom I counseled at the agency. He says he doesn't want to work with agency counselors, but wants to come back into counseling with me. "I signed a non-competition clause that said I could not pursue any clients. I have been told by the owner of the agency that if I get a call from any former clients, I need to refer them back to the agency. I want to know what is legally and ethically the correct thing to do? I appreciate your time."

"What is legal?"

The law of the land is that the only person who can legally give you legal advice is an attorney licensed to practice law in your state. To find a local attorney, start by asking your counseling friends and associates if they can recommend a attorney whom they have used in the past. [For recommendations from other counselors see: Counselor's Community of Referrals page.] In many areas, you can call the local county bar association (for example, King County Bar Association in the Seattle area) and ask for their

"Lawyer Referral Service." The receptionist will ask the nature of your question and then schedule an appointment with an appropriate attorney for a 30 minute consult at a set fee. The Lawyer Referral Service is a way for attorneys to connect with new clients and an excellent way for you to get inexpensive legal advice. For another source of guidance, call your malpractice insurance provider. Tell the switchboard that you are a counselor insured by their company and that you have a legal or ethical problem that you would like to discuss with their legal staff. Most insurance attorneys would prefer to discuss an issue before you are sued--it helps them avoid insurance losses. [If you are working as a counselor and do not have professional liability insurance, you are at great personal and professional risk. To locate an insurance provider see: Professional Liability Insurance for Counselors, Therapists, Psychotherapists, Social Workers & Psychologists.]

"What is ethical?"

You may have difficulty understanding the particular ethical principles that govern this non-compete contract situation. You might start by considering, "What code of ethics am I governed by?"

It is easy to forget that almost every professional organization that you belong to will have its own code of ethics. While these codes can be very similar, they often differ on many specifics. If I were an attorney preparing to sue you for malpractice, I would find out about your professional memberships and then choose the code of ethics I felt best supported the charges against you.

Every counselor in private practice in Washington State is supposed to have a client disclosure statement that is to be signed by each new client. I recommend that your disclosure statement include mention of the specific code of ethics which you feel is the guide for your professional conduct. You can study that code of ethics to become knowledgeable and informed and can also consult with the ethics committee of that professional organization when you face a difficult situation.

My favorite, "What makes sense?"

Most non-compete clauses have limits on location and time. Find out whether you are within the restricted area and/or the restricted time period. Read the contract. Abide by your contractual agreement. If either the geographic area or the time period is too big to be reasonable, your attorney can advise you.

Major point: in signing the agency's non-competition clause you acknowledged the prior relationship of those clients with the agency and agreed that you would make no attempt to serve agency clients if you leave agency employment. The non-compete clause gives the agency a legal way to punish you if you take their clients. The client in this question is an agency client. That would apply whether you contacted the client or the client contacted you. Common sense indicates you should refer the client back to the agency, or to another therapist, if that is what the client prefers.

If there is a particularly important (perhaps unique) reason that the client wishes to continue counseling work with you (and you agree on a professional basis), then you might make an appointment to visit the agency and talk to the administrator or treatment supervisor to see whether they would give you a written waiver of the non-competition agreement specifically for that client. This gives others the opportunity to review your reasons and whether you’re thinking is rational and reasonable. Listen to their feedback and abide by their decision.

"Observe fence lines and boundaries."

Boundaries are a part of many ethical questions. Imagine for a moment that you spent years riding the range and working as a cowpoke for the --BQ ranch. Now you have saved up enough to leave and start your own ranch next door. The fence-line marks the boundary between your properties.

Now it happens that there's a cute little calf that hangs his head over the fence and moos for you. You helped birth that calf and bottle feed him until he could eat other food. Now he clearly prefers to be with you. Why not just pick him up and lift him over to your side of the fence where he can be happy? Well, because it's against the law and you would be arrested as a rustler and branded as a thief!

Obviously, clients are not calves. Clients are not property and they have the right to choose who they want as their counselor. However, the counselor has a right to refuse to treat them. In a case like this, the ethical and legal burden of the decision rests upon the counselor--not the client.

Further, if your client knows that you have chosen to violate a contractual agreement in order to continue counseling him or her, this changes the boundaries of the "normal counselor-client relationship." It becomes a "special relationship" which should not be allowed to exist. It could cause the client to fantasize feelings about you or the relationship. Then when their feelings are not reciprocated, a client could turn to emotional blackmail--threatening to reveal your transgressions to the other facility or to the state licensing authorities. The "special relationship" could be a malpractice suit in the making.

Does taking such chances with your reputation and career make sense?

Imagine when you are being interviewed on television as a guest on the Dr. Phil Show, and he's saying to you, "What's the matter with you? What were you thinking?!"

Floyd Else, MA, LMHC, NCC, Webmaster

Reimbursement by Insurance Companies: I am a licensed counselor who would like to find out how to get onto the insurance company panels of preferred providers. How can I do it?

In the past, the technique has always been to contact each individual Provider Relations department of each of the health insurance companies and ask them for an application form, if they are accepting new applications. However, you can now go through CAQH, a Universal Credentialing Data Source. [The following is adapted from "Private Practice in Counseling" a column by Robert J. Walsh and Norman C. Dasenbrook in Counseling Today, an American Counseling Association monthly publication, in the June 2006 & August 2006 issues, and updated by this webmaster December 2007.]

The Council for Affordable Quality Healthcare, or CAQH, 1-(888) 599-1771, provides a way for licensed counselors to "submit their credentialing information to CAQH once, and it will then be made available to more than 100 insurance and managed care companies." NOTE: To go through this process, you must already have your CAQH number, which is obtained by being approved as a provider by at least one of the participating insurance companies!

Identification Number Is Needed: "A counselor who is already a provider for any of the insurance or managed care companies listed on the CAQH website can call CAQH and see if s/he already has a provider identification number. If so, CAQH will send that counselor a 'welcome packet' with information on how to apply."

Or, with Your ID Number in Hand, log on to “the CAQH website and complete the credentialing process online. If you have trouble completing it online, call (888) 599-1771 and have the credentialing packet mailed to you. Once completed, fax the necessary information to CAQH at (888) 293-0414. Use the fax cover sheet provided by CAQH instead of your own. Once processed, you should receive a fax or e-mail that your new status with CAQH has been provided to all participating insurance and managed health care companies."

If You Don't Have the ID Number, go through Aetna's Credentialing Customer Service Department at 1-(800) 353-1232 and ask to be referred to CAQH to receive an identification number. Aetna also has a "Behavioral Health Professionals Application Request" form that you can complete and submit online. Because Aetna is so willing to accept applications, there may be a big processing backlog. Some other insurance providers are faster but have higher requirement, including requiring a particular number of years of experience beyond licensure. United Behavioral Health requires two years of post-licensure experience and CIGNA requires at least 3 years. Both are very fast to process applications to become a network provider.

December 10, 2007, I talked to a representative at NetSource Billing, a billing service for professionals in the mental health field across the nation. Because NetSource Billing is involved in submitting claims to all the insurance companies, Medicare and Medicaid, they are very knowledgeable and willing to talk to mental health providers who have questions about obtaining the CAQH ID number. The representative said that one of the points she tries to make clear is that the CAQH ID number is only needed by those licensed professionals who want to be preferred providers on insurance panels. To contact these helpful people at NetSource Billing, call 1-866-441-1591 or visit

- Webmaster, Floyd Else

NOTE: Robert J. Walsh and Norman C. Dasenbrook are the co-authors of The Complete Guide to Private Practice for Licensed Mental Health Professionals. Look for them in a counselor training workshop near you. The complete library of all the “Private Practice in Counseling” articles is available to ACA members on the American Counseling Association website.

This document is Copyrighted© 2005-2012 by, Floyd Else, Webmaster, and may not be reproduced, in whole or in part without crediting the author, source and site name. All rights reserved.

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