Physician employment agreements are very prevalent. Unlike most Texas employees who are employed on an at-will basis, physicians typically have written agreements that can be worth hundreds of thousands, if not millions, of dollars.
In our practice, we see many disputes between physicians and their employers from both sides of the fence. Quite often these disputes are between practices or institutions and doctors who are just “hitting their stride,” developing loyal patients and looking at their practice options for the future.
At that point, both parties search for the contract they signed and put in a drawer a few years earlier and begin examining its arcane phrases with a scanning electron microscope.
The eventual terms of any agreement between a doctor and his or her employer depend on many factors, including the respective bargaining power of the parties. We thought it would be helpful for you to have a road map of the terms you are likely to encounter in your first agreement.
Like any document prepared by a lawyer, there is some fine print at the end. In the meantime, give some thought to these items (which by no means exhaust the important provisions of an employment agreement) before you make your first commitment as an employee:
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What is the duration – called the “term” – of the contract? This is the duration of your employer’s commitment to you, and yours to your employer. Is it long enough to allow you to establish your practice? Is it so long that you would be unfairly stuck with a fixed compensation structure while your practice grew? Does the contract automatically renew at the end of the initial term and keep renewing (usually for a year at a time) unless one side cancels with notice (called an “evergreen clause”) – which can be both good or bad, depending on how the contract handles it?
How is your compensation set? Is it tied to performance? If so, does the contract fairly allow you some influence on your performance goals and your employer’s support in meeting them? This tends to be a business term heavily influenced by market factors, but you still need to ensure that your future employer gives you a fair shot to maximize your income.
Review incentive compensation and bonuses. When are they paid? What offsets will the practice take for expenses (such as technicians and nursing staff)? If you leave before you receive a bonus, are you entitled to a pro rata share of the bonus or incentive compensation?
You will have a lot of expenses. Most employers pay or reimburse the basics, but consider some unusual expenses, such as costs associated with providing services at multiple locations, and don’t forget necessary certifications and continuing medical education. Don’t assume that your employer will pay all expenses of you being a doctor – get it clear up front.
Is there a paid vacation policy? What if you can’t or don’t choose to take all your paid vacation? Will the days roll over to the next year, or can you cash out your unused days?
Sick Leave/Personal Time
What does your employer provide if you are temporarily disabled due to injury or illness? Does the agreement define the term “disability”? If you are disabled, how long will you receive your base compensation? If you have minimum collection requirements in your contract, can this be adjusted to take into consideration a decrease in productivity due to a temporary disability?
On Call Obligations
Are your “on call” coverage obligations clearly spelled out? Is call limited to specified locations?
If Your Contract Doesn’t Go to Term
Yes, it happens. That great relationship at the outset of your employment can sour for a multitude of unforeseeable reasons. What are the conditions permitting either you or your employer to terminate the agreement before the end of its term? The procedures are critical here. This is a major source of litigation, as are:
The hands-down winner in the I-guess-I-need-to-call-a-lawyer sweepstakes is the famous “covenant not to compete” provision, sometimes shortened to “noncompete.” This is a provision that limits (but does not entirely prohibit) an employee’s ability to work elsewhere after the employment ends or is terminated. Some doctors are under the misimpression that these provisions are not enforceable in Texas because they are anticompetitive. Not true. It is true that there are special conditions imposed upon them in Texas, but if those conditions are met, courts will enforce contract provisions that keep you from practicing within a certain geographical area for a certain period of time after your employment ends. The good news is that there are ways to limit the effect of such provisions.
If your employer is a medical practice, consider requiring a commitment on its part to consider you for partnership (or whatever form of ownership the practice uses) after a certain period of time.
Your Patients’ Records
Your contract may end or your contract may be terminated prematurely. Either way, if you have your own patients you are going to want their records. You need to provide for that in the agreement.
The More Things Change
With federal law and regulation changing rapidly with respect to matters such as record keeping, reimbursement, and even compensation itself, employers have begun inserting provisions permitting them to make unilateral changes to the contract to keep it in compliance with law. Sounds reasonable, but you should have notice of the change and the opportunity for input (or the option to bail out).
Yes, your employer will provide it, but it’s more complicated than that – what happens when your employment is over? This issue is of particular importance with respect to your second employer and something called tail insurance. Big-dollar item.
If you have a dispute over the terms of the employment agreement, how will it be resolved? Frequently (and, in the case of hospitals, almost always) employment agreements provide for mandatory arbitration (that is, the parties cannot go to court; the dispute is heard by a non-judge with no jury). Does the contract provide that both sides must conduct a face-to-face meeting before initiating legal proceedings? Is there a provision requiring the loser to pay legal fees, and, if so, which side does it favor?
Two Sides to Every Story
We have focused here on things that the new doctor is going to want. Your employer is going to want some things, too, and it’s going to insist on them: Getting and keeping your license; maintaining your privileges at hospitals; abiding by the rules and regulations of the practice or institution; complying with legal requirements; and many more. Still, you want to make sure your employer doesn’t slip in anything unreasonable or phrases it in such a way that it turns out to be at “gotcha” at some later date.
As noted, this list only hits the highlights. There are many other possible provisions the new employee should carefully heed.
Browse more physician employment contract articles, written by Attorney Robert Wood: