To review restrictive covenants when selling an ABA practice, separate each noncompete, client or employee nonsolicit, no-hire, confidentiality, and cooperation term; identify the legitimate interest it is meant to protect; and map the restricted people, activities, services, clients, referral sources, employees, geography, duration, exceptions, remedies, and governing law. State law and federal enforcement can change, so transaction and employment counsel should evaluate the signed language. The agreement also needs practical exceptions for clinical ethics, client choice, records, testimony, ordinary employment, and required cooperation.

A covenant can outlast the excitement of closing

Restrictive terms often appear late in a sale process, when price feels settled and everyone wants to finish. Yet a covenant can shape where the seller works, whom the seller may hire, which families or referral sources the seller may contact, what investments are allowed, and how the seller responds to a former colleague for years. It can also interact with employment, earnout, rollover equity, confidentiality, and indemnification provisions scattered across several documents.

Slow the conversation down enough to translate every restriction into an ordinary Tuesday after closing. Could the seller teach, consult, invest, volunteer, supervise, open a non-ABA service, work for a health system, answer a former employee, or respond to a family's request? Learning how to review restrictive covenants when selling an ABA practice starts with those concrete questions, not with the label “standard.”

Separate the provisions before judging the package

Create a covenant map covering the purchase agreement, employment or consulting agreement, equity documents, seller note, earnout, confidentiality agreement, transition services, and any side letter. Distinguish noncompetition, client nonsolicitation, referral-source nonsolicitation, employee nonsolicitation, no-hire, confidentiality, nondisparagement, publicity, cooperation, invention assignment, and standstill terms. Each provision has different actors, purposes, triggers, and remedies.

The SBA sale guidance recommends qualified advisers and a comprehensive attorney-reviewed sales agreement. It does not determine whether a restriction is necessary or enforceable. Ask counsel to mark overlaps, inconsistent definitions, cross-defaults, and periods that restart. A three-year purchase-agreement restriction and a two-year employment restriction may not run together. A covenant hidden in rollover documents can bind the seller even after employment and purchase claims end.

Name the interest the buyer is protecting

A buyer may reasonably want the goodwill, relationships, workforce stability, confidential information, and operating opportunity it paid for. That explanation should connect to the restriction. If the buyer is acquiring one local clinic, a ban on every behavioral-health activity nationwide deserves more scrutiny than a focused limit related to the sold services and relationships. If the seller keeps another business, the boundaries must be precise enough for both companies to operate.

Ask which facts support the proposed people, activities, geography, duration, and remedies. Separate protection of purchased goodwill from an attempt to eliminate ordinary labor-market competition or control professional conduct. The question is not whether the buyer wants certainty. It is whether the wording protects a recognizable transaction interest without creating accidental bans neither side priced or intended.

Federal headlines do not replace current legal research

The FTC's Noncompete Rule status page currently states that the 2024 rule is not in effect and is not enforceable. It reports that a district court stopped enforcement and that the FTC later took steps to dismiss its appeals and accede to vacatur. Owners should not rely on older summaries that describe the rule as an operative nationwide ban.

That status does not make every noncompete enforceable. State statutes, common law, sale-of-business exceptions, worker protections, professional rules, choice-of-law limits, public policy, and later federal or state action may apply. Transaction and employment counsel should check the law for the seller, buyer, employees, locations, clients, and proposed activities at signing and again before reliance. A blog post, prior deal, or contract recital cannot supply that analysis.

Worker restrictions deserve their own antitrust and employment review

A sale covenant for an owner and a no-hire or nonsolicit affecting employees can raise different issues. Current DOJ and FTC worker guidelines describe agency views on practices affecting worker mobility, wage and term information, no-poach agreements, and labor-market competition. They do not determine the legality of a particular sale covenant or replace state employment law.

Identify which employees are covered, whether the restriction is unilateral or reciprocal, how general recruiting is treated, what happens when an employee initiates contact, and whether the buyer can reject or waive a hire. Review contractors, former workers, candidates, supervisors, and employees who leave involuntarily. Avoid informal side agreements between competitors about pay or recruiting. If the business rationale concerns orderly transition, write that transition obligation directly instead of using a sweeping workforce restraint as a proxy.

Clients are not an asset that can be ordered to stay

ABA families, clients, guardians, and payers have rights, preferences, coverage limits, and continuity needs that do not disappear in a sale. A nonsolicit can govern the seller's conduct, but it should not be written or administered as a prohibition on client choice, a barrier to required records, or an excuse to withhold truthful transition information. Professional and clinical duties remain distinct from commercial goodwill.

The BACB Ethics Code addresses certificant responsibilities including truthfulness, conflicts, client welfare, documentation, confidentiality, supervision, and service transitions. The CASP public organizational-guidelines overview offers a cross-functional frame while its detailed material remains separate. Neither source validates a covenant. Qualified clinical, legal, payer, privacy, and client-rights reviewers should plan notices, referrals, records access, emergencies, and unavoidable contacts.

Definitions decide whether ordinary life becomes a breach

Read every defined term as if a new employer, investor, judge, or arbitrator must apply it without knowing the deal's history. “Competitive business” may sweep far beyond ABA services. “Customer” may include a family that made one inquiry years ago. “Territory” may expand with the buyer after closing. “Solicit” may capture a public announcement or a response the seller did not initiate. “Affiliate” may include entities the seller does not control.

Test the wording against realistic scenarios: passive fund ownership, teaching, research, volunteer work, advisory roles, telehealth, a different age group, a different service, a former employee asking for a reference, and a family independently requesting records. Write negotiated exceptions directly into the documents. Oral assurances from a deal team may be difficult to use after personnel change.

Duration, territory, and triggers should match the negotiated reality

Build a timeline from signing through closing, employment, earnout, escrow, seller-note maturity, rollover exit, and each covenant expiration. Identify whether the period begins at signing, closing, employment termination, payment, breach, or another event. Determine whether amendment, extension, tolling, or alleged violation can lengthen it. A restriction that seems short in isolation may continue much longer when triggers stack.

Map geography using the actual service area and delivery model, not only state names or mileage. Consider home-based services, clinics, schools, telehealth, referral markets, employee commuting patterns, and planned but unopened locations. The seller should understand whether the restriction follows the practice as the buyer expands. Counsel should assess the scope under applicable law rather than converting a market map into a legal conclusion.

Remedies can matter more than the headline restriction

Review injunctions, temporary relief, damages, fee shifting, liquidated damages, disgorgement, tolling, notice, cure, dispute forum, jury waiver, arbitration, security, setoff, indemnification, seller-note payment, earnout, employment termination, and equity repurchase. A covenant linked to several economic documents can put far more at risk than the value assigned to it in negotiations.

Require a clear process for disputed conduct and emergency relief. Determine who may waive a restriction and whether consent can be withheld for any reason. Keep alleged covenant breaches separate from unrelated payment obligations unless the negotiated documents deliberately connect them and advisers explain the effect. A buyer should not gain automatic access to clinical or employment records merely by making an allegation, and a seller should not ignore a court order while contesting the merits.

Tax reporting may recognize value without settling enforceability

The current Form 8594 instructions list a covenant not to compete entered into with an acquisition of a trade or business among section 197 intangible examples and explain covered asset-acquisition reporting. IRS Publication 544 provides general federal treatment for dispositions of business property and certain intangibles. These materials do not assign the covenant's value, decide enforceability, or calculate the seller's tax.

Coordinate the covenant language, purchase-price allocation, employment compensation, contingent payments, and both parties' reporting positions. A number chosen for a tax schedule should not silently redefine what conduct is prohibited. Tax advisers should model federal, state, entity, basis, allocation, and payment-timing consequences using the signed transaction, while counsel preserves the negotiated legal scope.

A fictional restriction becomes workable through examples

Willow Harbor ABA is fictional. Its buyer proposes a four-year restriction covering all autism-related services in every state where the buyer operates now or later. The seller expects to teach graduate courses, advise a speech-therapy startup, make passive investments, and work clinically outside the acquired service area. A separate employment agreement would restart a two-year restriction when the transition role ends.

Counsel maps the documents and applicable state law. The parties narrow services and territory, address the overlapping periods, add teaching and passive-investment exceptions, define unsolicited contacts, preserve required client and records duties, and separate disputed covenant claims from routine seller-note payments. The example does not say those terms are universally lawful or fair. It shows how concrete future scenarios expose ambiguity that a broad label conceals.

Leave the closing table with an operating guide

The final review should produce more than redlines. Create a one-page guide listing each restriction, bound parties, protected interest, activities, services, people, territory, period, trigger, exceptions, approvals, notice, records route, remedies, and legal owner. Add a calendar and a procedure for asking whether a new role or investment fits. Preserve the signed advice and facts supporting the agreement.

That is the practical answer to how to review restrictive covenants when selling an ABA practice. Current law, precise drafting, tax coordination, professional duties, and real-life examples all matter. Recheck the rules before a planned activity and seek qualified advice rather than testing a boundary through accidental breach. A covenant can protect purchased goodwill without becoming a source of surprise only when both sides can explain what it permits as clearly as what it forbids.

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