By Patrick M. Connolly, Esq.and Terry Lane
Be honest. Have you ever read an employment contract line for line? Or do you, like most people, scan over it and trust that it is all in order? Most people are reluctant to wade through the legal jargon and instead, hope that everything is as it should be. It is essential for both the client and the physician to thoroughly understand and agree upon the details of the employment contract. Attorneys are certainly excellent sources to clear up any confusing contract language you may not understand. They can also help make sure your needs are taken care of. Everyone has points that are important to their unique situation and should be included in their contract.
This article is not intended to be a comprehensive guide, but the generalizations we mention are specific to physicians. How many of these criteria have you considered?
The Basics
- Term of the contract—this is the period of time that both the physician and the employer are held to the contract. The most common term is one year.
- Compensation—sometimes, contracts contain clauses pertaining to money a physician might earn on his or her own time. An example would be money earned through writing articles or through public speaking engagements. It should be written into the contract whether or not this money belongs to the practice, or stays with the physician.
- Bonus structure—the contract should explain how the bonus is set up, what the physician needs to do to obtain the bonus. If there is a formula regarding bonuses, it should be detailed in the contract so there are no misunderstandings.
- Buy-in—if there is a buy-in opportunity, it should also be outlined in he contract – when is it supposed to occur? While an exact number may not be given, the buy-in amount, or formula, should be detailed in how it is structured and how it will be determined.
- Benefits—health insurance, life insurance, dental, etc. can vary substantially by organization.
- Time Off / Vacation & Holidays—common vacation is four weeks.
- Call Schedule—although you can’t delineate call schedule in a contract because you never know exactly how many physicians will be available at any given time for coverage, you can state that call schedule will be “fair and equitable”. Sometimes, junior physicians may have a heavier load than their senior partners. If so, this should be stated in the contract.
- Non-competition covenants—the non-competition covenant should be explained clearly in the contract and should include covenants during and after the term of the contract. It should be reasonable in terms of time, distance, and money. For more information on non-compete covenants, see part 2 of this two-part article. This is a complex issue that we will devote more time to next issue.
- Malpractice—what is provided and what are the limits of liability? How much is the policy for?
Other Criteria
- Income Continuation Agreement—in the event of a disability, is there an income continuation agreement? This is separate from medical disability.
- Continuing Medical Education—$2500 per year is common, including cost of education and time off. This, however, varies greatly contract to contract.
- Termination of Contract Stipulations—under what conditions can the contract be terminated?
- Grounds for Termination—What are the grounds for termination? If a physician sees a “Termination without Clause” clause – it should make him/her think twice. If the Termination without Clause is included in the contract, it must apply to both parties. The fairest contracts provide for a 90-day written notice. If there is severance pay in the event of termination, what is it?
- Compensation Details—what compensation is there beyond straight salary such as, a percentage of collections, a draw that is reconciled periodically, etc. While it is not possible to provide exact numbers, contracts should contain the formula used for determining these other sources of compensation, with minimums if at all possible.
Look Out For
A “Liquidated Damages Clause”—a liquidated damages clause makes the physician responsible to pay money back to the hirer in the event of termination. The amount of money owed is based upon money that was expected to be earned over the term of the contract.
When to Negotiate
A physician’s negotiation leverage often depends on the size of the entity hiring him or her. In a large multi-specialty group or hospital, where a standard contract is used that has already been accepted and agreed to by twenty or more other physicians – it is unlikely that the new physician will have much power in altering the across-the-board contract stipulations.
In smaller practices, negotiation is more flexible and the physician may be able to customize the contract more toward his or her needs and expectations.
“A contract is only as good as the two people entering into it,” says Rob Rector, Vice President of Recruiting for Pinnacle Health Group (Atlanta). “If there isn’t any trust between the two parties, the contract is worthless,” says Rector, adding, “how are you going to work together down the road if you’re uncomfortable at this stage?”
Rector recommends using a recruiter as a buffer during contract negotiations. “When there is a two-party negotiation, there is an inherent opportunity for mistrust and miscommunication. Using a recruiter as a buffer alleviates stress in the negotiation process. The client and the physician can confide in their concerns to the recruiter, and the recruiter can acts as a third-party to help both the client and physician feel satisfied with the results.”
In closing, a good contract should be fair to both parties. If you are not satisfied with the contents of your contract, the time to address your concerns is during the hiring process. Utilize the experience of your recruiter to help you negotiate aspects of your contract that you are unhappy with. It is also a good idea to use an attorney who is well-versed in contracts and contract law to clear up any sections or clauses you may not understand in the contract. With a solid and fair contract between physician and employer, both are getting off on the right foot, beginning what will probably be a rewarding and successful partnership.
Patrick M. Connolly is an attorney with Gambrell & Stolz, L.L.P., Sun Trust Plaza, Suite 4300, 303 Peachtree Street, Atlanta, GA 30308 , (404) 577-6000
Understanding Physician Employment Contracts, Part 2 of 2 (Restrictive Covenants)