A Guide on what to expect from Physician Employment Contracts
As a physician, your employment contract will control your professional, and most probably your private life. The contract will undoubtedly contain a number of unclear paragraphs and terms, and as a medical professional, you shouldn’t have to wade through them alone and without help. Understanding how these paragraphs interplay to form the contract without the help of a knowledgeable lawyer is risky, as some employment contracts are written to heavily favor the employer over the employee.
For that reason, it is wise for physicians to hire a lawyer to look through and approve future employment contracts. And while this article won’t replace such professional help, it will work to help the reader better understand the central ideas that make a good physician employment contract. This article also works to provide insight into the meaning of these central ideas and how they may affect the employee who signs it.
What makes a good physician employment contract?
A good physician employment contract must be written so that it is readable and understandable by those who sign it. The contract must also attempt to balance the interests of the employer with the interests of the employee. These two traits provide principal ideas for good physician contracts.
With respect to clarity and balance, the physician employment contract contains many paragraphs, (sometimes called provisions, terms or clauses) which must be fully understood before the employee signs on the bottom line. The aim of this article is to help familiarize the reader with ten of these most important “provisions” so that any reader can develop their primary understanding of physician employment contracts.
Who are the parties to the contract:
The contract will include the names of all of the parties who will execute the contract. This includes names of legal entities, such as partnerships, corporations and limited liability companies. It is important that the contract refers to the parties by their proper legal names, because this helps to make the contract clear and understandable to anyone attempting to interpret the contract.
Term of the contract:
Simply, the term is the effective time of the contract. The term of an average physician employment contract is for one or two years. A contract’s term can also automatically renew if both the employee and the employer agree.
Termination of the contract:
One of the most important provisions of an employment contract is the “Termination” provision, which usually appears toward the end of the contract. It is important to understand the whole provision because it explains how the employee or employee can end the contract before its term has elapsed. A clear and understandable “Termination” provision will give the employee a good understanding of the employer’s conditions for employment.
There are two important elements that an employee must be aware of: 1) whether the contract can be terminated without cause or reason; and 2) whether notice (written or otherwise) must be provided to the other party when the employee or the employer decides to terminate the contract.
The “Termination” provision containing language allowing the employer to immediately terminate the employment contract without cause or reason can be problematic because it gives the employer a lot of discretion. Preventing termination without cause should be an overarching reason for the physician employment contract, and it is important to be wary of this language. Immediate termination should only occur if there are major changes in circumstances like if the employee loses his or her license to practice medicine or is convicted of a crime.
It is important for the employee to understand that the contract can be terminated by giving proper notice to the other party. It is recommended that the contract state that notice be given in writing. The contract should also set out how far in advance notice must be given; typically, a period of 30, 60 or 90 days should be expressly written in the contract. This will allow the other party to find suitable replacement.
The employee physician’s responsibilities under the contract:
A well written contract should provide a detailed description of the physician’s duties, schedule and expectations about call. A well detailed “Physician Responsibilities” provision should also provide information about the employee’s expected administrative involvement within the practice.
A contract that simply states “the physician will be required to perform the usual duties of a physician” lacks the necessary clarity because it does not give the employee any information about what will be required of them.
Attention to this provision is important when the employee is concerned about his or her work schedule, call schedule or wishes to only work in a specific clinic.
The Employer’s responsibilities under the contract:
The contract will also define the duties of the employer. These might include specifics like providing the employee with office space, clinic space, time for clinical research, etc.
This provision is important when taken in conjunction with the employee’s responsibilities because together they provide the employee with an overview of how the medical practice operates.
When reading these provisions together, it is important to compare the details contained in these paragraphs with your past experience and your future career expectations. For example, if clinical research is important to you and your career, then negotiating to perform such research should be paramount. Creating a balance to the responsibilities of both parties will help to ensure a better working relationship.
This provision is typically broken down into salary and benefits. The salary portion will provide the employee details regarding their guaranteed salary. It may contain further detail about the compensation the employee may receive based on the number of patients they see and treat, (typically, the employer will provide the formula for such compensation).
It is important for the employee to perform their own due diligence business side of the practice they are joining before signing the contract. The employee should always try to confirm the employer’s patient numbers and schedule and whether such information is likely to change in the near future.
The benefits portion will provide details on family health insurance, dental insurance, life insurance, allowance for continuing medical education, vacation time, sick pay, short term disability, long term disability, family leave and retirement plans. It is important for the physician to have a good understanding of which benefits best suit them and their family.
Physicians should also consider the importance of disability insurance. Experiencing short term disability caused by illness, accident, injury or pregnancy can be financially destructive to anyone. Short term disability insurance replaces such lost income when a physician is unable to work.
Finally, physicians should speak to a financial advisor on how to maximize their benefits with respect to tax deferred retirement plans and any matching contributions from the employer.
Medical Malpractice insurance and tail coverage:
Most medical employers will provide their employees with professional liability insurance. The insurance policy will provide financial cover typically in the 1 million per incident and 3 million aggregate range. These coverage rates vary and are based on the specific medical specialty and the location of the practice.
Tail Coverage insurance is equally important. This insurance covers the employee after they leave the practice, at a point when the professional liability policy has ended. Employers will often pay for tail coverage insurance but sometimes will ask the employee to split the cost of such coverage or require the employee to pay for the coverage themselves. If the employer does not offer tail coverage, the employee should make sure that the cost of purchasing such coverage is reflected in the overall compensation of the employee.
Non-Competes, Non-Solicitations and Confidentiality clauses:
Possibly one of the most important provisions of the employment contract, has to do with the employer’s ability to restrict an employee’s ability to work once their relationship is over. Non-compete agreements prevent departing employees from competing with the employer in a specific geographic area over a specific course of time. The non-compete clause must be read together with local law surrounding such provisions in order to determine whether the non-compete is reasonable or even legal.
Generally, courts today tend to regard restrictive non-competes negatively. This means that if the non-compete is not reasonable, an employer won’t be able to enforce it. The current approach is to provide a reasonable balance between the employer’s interest in protecting his practice and the employee’s ability to earn a living without having to move far away. However, non-competes are sometimes wholly dependent on local laws and precedent, which is why it is important to contact a lawyer who can guide you through these issues.
Some employers have also begun to use non-solicitation clauses in their contracts. A non-solicitation clause will often substitute the non-compete clause. While it will give the employee the freedom to practice anywhere, it prevents the employee from soliciting patients away from the employer. In the same regard, confidentiality clauses work to prevent the employee from taking and using for their own benefit any proprietary information or data learned during your employment. It is important to understand how each clause works and how they may affect you after leaving the practice.
Ownership of clinical research and writing:
The contract may also specify how clinical research will be credited and owned upon termination. If clinical research will be performed during the scope of the employment, such results and written materials published during the employment will likely belong to the employer. However, some contracts contain provisions giving the ownership rights to the person who performed the work. It is important to understand how, why and in which way these rights are allocated. Therefore, negotiating for the ownership of research and published work must be clearly allocated in the employment contract.
Most likely any employment dispute will be resolved by talking to your employer. But, who will resolve a dispute when neither party wishes to budge? Employers will provide a provision on how such disputes will be resolved, calling for a 3rd party mediator and/or arbitrator to solve the problem before it can be litigated before a court. Because litigation typically costs more and takes longer than mediation/arbitration, these provisions help to save both parties time and money. However, both methods will still end up costing the employee time and money.
This provision may also assign the costs of the dispute resolution. Costs can be split or assigned to the losing party of a dispute. An employee must carefully consider the financial consequences of this provision before accepting the contract.
These are some of the more important provisions contained in typical physician employment contracts. While employers may generally use a standard employment contract form, a prospective employee should be prepared to encounter one-sided, unbalanced contracts.
In negotiating your employment contract prospective employees should always consult an attorney for legal advice. Remember, it is always prudent to make sure that you understand everything contained in your contract, no matter how daunting it is. Asking your future employer for clarification will go a long way to helping you, but will not replace professional help. By seeking the help of an experienced lawyer, your interests will first and foremost be protected.