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By signing an employment contract, you are agreeing to be legally bound by its provisions. It can be the most important financial business decision you will ever make. Complex in what it says (and does not say), the typical physician employment contract spells out your pay, determines how you will practice, decides your professional growth and assigns serious legal risks. This is one document that can never be taken lightly.
Understand that any employment contract that you are offered has been carefully crafted by the employer’s attorney in a way that fully protects the interests of the employer while giving considerably less attention to your objectives. Any misunderstandings or possible problems overlooked can cause you extremely painful consequences later.
Receiving your contract is an invitation to bargain. It could be disastrous to sign immediately; you might pay the price later. Before acceptance, you must carefully align the offer with your own objectives and tie it to what would be fair to you.
Contract bargaining is a delicate and time-consuming process, even for the most skilled professionals, involving carefully evaluated terms, redrafting contract language and careful negotiations. The key is not just to know what to ask for but “how” and “when.” This is where your own unique negotiating skills together with expertise from an attorney knowledgeable in this area will be essential to you.
Because how the contract is negotiated sets the tone for your future employment, you want these negotiations to end in a win/win environment—devoid of potential future conflicts and misunderstandings.
Information concerning major practice considerations, compensation and benefits that should always be addressed include the following:
The contract should contain a complete job description, so that once you are actually on the job you will not find yourself expected to do things that you had not anticipated. Working relationships, such as to whom you report, who reports to you, and your say in hiring support staff, should be defined.
Does the contract contain a probationary period? Often in making employment agreements, both parties have invested heavily in the hiring process and have made major commitments predicated on the stability of the employment relationship. If sufficient investigation is performed in advance, the probationary provision will rarely be needed.
Is a regular and defined personnel evaluation provided? A review should occur at least annually, and preferably semi-annually, so that both the employer and the physician know where they stand. Contracts may include the general criteria that will be considered in the performance evaluations, such as: quality of medical services provided, nature and frequency of patient complaints, productivity in terms of number of patients seen per day, and contributions to the practice’s operations, such as committee work, teaching duties or community activities.
Traditionally, employed physicians invest their time at reduced compensation in return for the expectation of ownership. So in fairness, the new doctor should be given some idea as to whether and under what circumstances an offer for equity status may be extended. The contract should provide for interim review. The clearer the understanding about future ownership, the more likely that it will result in a smooth transition. If there is an opportunity that you might become an owner, vague promises must be crystallized into specific timing, conditions and methods to be used.
The extent of coverage and who is responsible for premiums are very important. You can work with the prospective employer to make sure that all terms of such insurance are not a cause for any undue burden upon you—in costs, indemnification, or liability. To avoid later surprises, tail coverage financial responsibility (applicable if you leave the practice) also should be addressed on the front end.
Frequently employers ask for a “covenant not to compete” that states that you cannot practice podiatric foot and ankle surgery for a specific period of time and geographical area following termination of employment. These terms and conditions can be successfully negotiated away, or made less burdensome.
If outside employment or moonlighting is not permitted, your contract must spell out such prohibitions. Often, you can also draft language to cover under what conditions any allowance for outside practice is to be approved. The issue of whether an employed physician may engage in outside podiatric medicine activities—like teaching, lecturing, writing and directorships or medical-legal consulting—and whether compensation from such activities belongs to the employer or the physician, should also be clearly defined.
What happens if the employer is bought out—a common occurrence in today’s world of consolidations, acquisitions and mergers? The contract is likely to provide for assignability but at whose discretion? These are questions that must be answered adequately to protect your future.
Clauses in an employment contract addressing “market conditions” are included solely for the benefit of the employer. It is vague and often indicates that it is included in the employment contract to address rapid changes impacting all health care providers. It allows the employer to respond and adjust to these changes quickly and effectively by affording the employer the exclusive right to reassign the contracting physician to a different department or facility, alter the physician’s work schedule and make any other changes in the conditions of the physician’s employment according to the needs of the organization. Because of the potential legal invalidity of this clause, both contracting physicians and employers should avoid the inclusion of this clause in any physician employment contract.
You must examine other features of a contract, such as access to financial records upon which compensation is paid, to ensure your interests are well covered.
Salaries today vary widely depending on the extent of the specialty training, years of experience and differences in geographic regions. Some compensation levels are rising, others leveling off and others declining. It is important that you do your homework beforehand.
- Compare your salary to industry norms, and determine whether negotiating a higher salary, step increases and bonuses are possible.
- Review whether your compensation could create legal risks under independent contractor and/or referral prohibition regulations.
- Analyze whether you will get what you are anticipating (i.e., that disbursements are clearly defined and that there is no way disbursements can reasonably be delayed).
Benefits are usually a major portion of your total compensation package, yet vary widely and often allow room for comparison within industry norms. In your negotiations, being able to use comparisons will give you a heads-up position in this area.
- Assess the reasonableness of the range of benefits provided, such as health care insurance, retirement plans, other insurance, dues and license fees, student loans, profit sharing and moving and relocation expenses.
- Review the reasonableness of leave policy for vacation, personal leave, CME, holidays, sick leave, disability, maternity and other time-off allocations.
- If necessary, help clarify what details about space facilities, supplies and equipment are available for you and who is responsible for payment and upkeep.
Besides compensation and the numerous other key considerations described above, some other equally important clauses regarding dispute resolution and termination definitely warrant careful review. The termination clause is certainly one of the most important clauses in an employment agreement. Close attention should be paid to its terms and conditions.
Should disputes arise, mediation or arbitration can prove advantageous, but only if the ground rules are specified in advance. The contract must stipulate how to discourage frivolous contentions by an opponent should such a dispute arise and attempt to resolve the dispute and save the relationship through arbitration and mediation.
Employment contracts should have both a starting date and an ending date. Contracts often provide for automatic renewal or annual review. It is important that you make sure that all conditions are spelled out. The contract should state whether or not there is any guaranteed wage continuation if the physician is terminated by the employer.
Absent an agreement otherwise, employment generally is “at will” (i.e., it can be terminated summarily for any reason). It is essential that your contract have proper notification requirements for termination and limit termination to a defined “cause.” A Memorandum of Understanding can provide for early notification of any dissatisfaction and to provide for corrective action opportunities that could avoid termination.
Legally, termination may be “for cause” (based upon a reason or justification related to job qualification or performance by either party) or it may be “without cause” (no reason needed).
To maintain flexibility, the employer may wish the contract to contain a provision that states it may be terminated, without cause, by either party upon a certain number of days prior written notice, such as 30, 60, or 90 days. This type of term essentially leaves the physician and the employer with a contract that lasts only for the stated notice period, subject to potential renewal. The employed physician should consider whether he/she can afford to be subject to termination without cause upon such short notice. Similarly, the employer should consider the possible disruption to the practice that might occur if the physician left on short notice.
Any physician leaving a practice has the ethical right and obligation to inform his/her patients of the fact that he/she is leaving and to give the patients the opportunity to choose whether to remain with the group or go with the individual physician. The overriding principle should be to give the patients the right to choose. |