7 Key Issues In Physician Employment Contracts

Whether you are considering full-time or part-time employment, a newly minted doctor leaving a residency program or a more seasoned practitioner joining a group practice, the following key aspects of an employment relationship should be considered before agreeing to any arrangement.

1. Let’s Not Shake on It

Employment relationships should not be based on a handshake. More often than not, handshake deals go sour because of misunderstandings, misaligned goals, selective amnesia, and diverging expectations. While even a well written contract may not always prevent disagreements it nonetheless goes a long way in preventing future problems if for no other reason than forcing the parties to consider the minimum expectations of the employment relationship. Get it in writing!

2. Money, money, money

One of the significant terms in any employment agreement is compensation. Doctors should understand the method used for paying out the salary as well as the bonus. Is the compensation tied to productivity? fixed? performance based? based on patient satisfaction? business development? combination of factors? Is the salary subject to deductions other than regular payroll deductions, such a expenses or liability insurance? Is compensation subject to other offsets, such as office expenses? Being clear about how compensation is calculated is an important step toward reducing future tension.

3. Sail away, sail away, sail away

In addition to compensation, clarity as to the type and scope of benefits offered with an employment relationship is essential. How many vacation days will be permitted? How is time off calculated (paid time off or another method?). Will the new doctor be expected to cover all holidays? It is important to keep in mind that employment contracts often have clauses prohibiting newly hired doctors from taking any time off for at least the first three months of employment.

Understanding other benefits being offered is also good preventative medicine. Will the newly hired doctor participate in pension/profit sharing plans? Will the practice pay for disability insurance? professional liability insurance? professional and license dues? moving expenses and student loans? tail coverage? CMEs/books and periodicals? It is helpful to specify not only which benefits are being offered but also any financial limits.

4. I have to do what?!

Work responsibilities are another key aspect of any employment arrangement since disagreements often crop up from the parties’ diverging understanding as to the duties of the new hire.  The number of office hours, clinical versus administrative duties, office space, allocation of equipment and support staff, responsibilities for call coverage, assignment of patients, holiday coverage, specific duties not regularly performed by doctors in a particular specialty, marketing and related costs, these and other related issues should be discussed and clearly identified in the contract.

5. You mean I am not going to be  a partner?

If becoming a shareholder is an important future consideration for a doctor joining a practice then the road-map of the co-ownership arrangement should be spelled out in the employment agreement. It is a good idea to include in the contract the percentage of ownership a doctor would be permitted to own, how long the doctor must work before the buy-in is triggered, the buy-in formula, along with any other benchmarks that may be considered by the practice owner.

6. Well, Good-Bye to You too!

Knowing and understanding the term of the employment agreement, renewal, and how the relationship can be terminated are other key terms in an employment contract. Are there any triggers that will automatically terminate the contract? What is the definition of “for cause” termination? Are there other reasons that could trigger a termination? Equally important is to know the ways in which the doctor can voluntarily leave a practice. Paying attention to any notice requirements is also important.

7. You mean I can’t open an office across the street?

Before a doctor signs the employment agreement, it is important to understand if there are any post-employment limitations. Employment contracts often have restrictive covenants and non-solicitation/non-recruitment clauses that may hinder employment opportunities for a doctor in the foreseeable future. Both New York and New Jersey courts enforce reasonable restrictive covenants making these non-compete clauses important terms to be negotiated before the employment agreement is signed.

Doctors should analyze these and other provisions of an employment contract before signing on the dotted line and consult a knowledgeable attorney.

If you are considering an employment relationship and have questions regarding your contract, or have other legal questions, please contact us.