Negotiating the Physician Employment Contract

20 TIPS FOR PHYSICIANS NEGOTIATING THEIR OWN EMPLOYMENT CONTRACTS

by George F. Indest III, The Health Law Firm

Following are a few tips for any physician who is involved in negotiating his or her own employment agreement.

1. 1. There is no such thing as a “standard physician employment agreement.”

1. 1. Everything is negotiable.

1. 1. Be sure the wording of the contract represents exactly the agreement you made.  If it is different or not specified, the language in the contract will govern in any future dispute.

1. 1. Be sure that every blank in the contract is completed and filled in before you sign.

1. 1. Be sure that every Exhibit, Addendum or Schedule referred to in the contract is completed and attached before you sign.

1. 1. Shun “legal” advice from your peers and, especially, from the accountants and representatives of your future employer.  Misinformation about legal issues abounds.  Just because one court may have decided a legal issue a certain way in one case does not mean a different court would not reach a different decision.  Every set of facts and circumstances, every contract and every case is different.

1. 1. Obtain and review copies of every document referred to in the agreement.  These are considered part of the agreement.  These may include the practice’s policies and procedures, the employee handbook, a code of conduct, sexual harassment policy, compliance agreements, etc.  Keep these in a file with a copy of your contract.

1. 1. Carefully consider clauses that allow the employer to terminate the agreement without cause on a 30 day, 60 day, 90 day or 180 day notice.  With such a clause in your contract, you no longer have a one year or two year agreement.  Instead, you have a 30 day, 60 day, 90 day or 180 day contract.  Can you find another job and relocate in 30 days or 60 days?

1. 1. If there is a “for cause” termination provision in the contract, be sure to include a “cure” provision.  This is a provision which requires the employer to provide you written notice of any deficiency or breach and allows you a certain period of time (usually anywhere from 10 to 30 days) to cure it.

1. 1. Ensure the contract is clear throughout that you are an employee and not an independent contractor.  Employees receive far more benefits and have more protections under the law than do independent contractors.  If you sign on as an independent contractor, you will be assuming many expenses and liabilities that the employer would ordinarily be required to assume.

1. 1. A promise to make you a “partner” or “shareholder” in the practice after a certain period of time will not be enforceable unless all of the terms are specified in order for a court to enforce it.  (Price, timing, percentage of ownership, method of payment of the buy-in, etc.).  Think of an option to purchase a house.  Unless all of the terms for a binding contract are set forth in writing and agreed to by the parties, it will not be enforceable.

1. 1. If you sign the agreement, be prepared to honor it.  Do not sign an agreement thinking that there may be certain provisions that won’t be enforceable or that you won’t be required to follow in the future.  Assume that every part of the contract is enforceable.

1. 1. Restrictive covenants (sometimes referred to as covenants not to compete) are enforceable in Florida.  Although there are many exceptions and defenses that can be used to defeat or prevent the enforcement of a restrictive covenant, unless you have the money set aside to finance litigation, expect to honor it if it is in the agreement.  As an employee, your negotiation strategy should be to:  a) have it removed completely, or b) reduce the period of time and reduce the geographic area as low as possible.  Also, it should be worded so as to only apply to the office or location in which you work and to the medical subspecialty or type of practice in which you will work.

1. 1. Avoid assuming any obligation to pay the premium for tail coverage for professional liability (medical malpractice) insurance, especially if the employer terminates the employment.  If you are not able to negotiate this away completely:  a) reduce the percentage you agree to pay to 50% or have it reduced 25% for each year you are in the practice, and b) insert a provision that if you maintain the same insurance company or obtain retroactive coverage, this will be substituted for tail coverage.

1. 1. Visit the practice, hospital and area at least three (3) times before signing.  One of these visits should be without the knowledge of the potential employer when you can tour the geographic area on your own.

1. 1. Contact any physicians you know or have met in the past who live in the area or any surrounding areas.  They may be able to provide you information regarding your potential employer, hospital or city that may affect your decision.

1. 1. Do your “due diligence” before agreeing.  Ask to see actual billing and collections figures and income statements.  Talk to other associates.  If your compensation will be based on productivity, speak with another physician who is similarly compensated about how his/her compensation is computed.  Visit any hospital, nursing home or other facility where you will have privileges or see patients.  Discuss the quality of the equipment and stuff with other physicians and physicians in surrounding communities.

1. 1. Do not buy a permanent residence (house or condominium) during your first two years of employment with a new practice in a new location.  Rent or rent with an option to purchase.  This will give you much more flexibility if the employment situation does not work out to your expectations.

1. 1. If you receive a signing bonus, put it in the bank in a CD or money market to use as needed in connection with tips 14 and 15 above.  This may be your personal “golden parachute” if you need to leave a bad situation.

1. Do not start working until you have a copy of the employment agreement.  A draft copy if not sufficient.  A copy signed by you but not by the employer is not sufficient.  The most common problem we see when there is a physician employment dispute is that the employee does not have a copy of the contract that is dated and signed by the employer.

(revised 2/12/2012)

This article is for information purposes only and does not constitute legal advice.

© Copyright 2012 George F. Indest III, Board Certified by The Florida Bar in Health Law, The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, Florida 32714. Phone: (407) 331-6620. All rights reserved.