What to Look for in a Physician Employment Contract

After coming out of residency and getting your medical license, you may be eager to join the workforce as quickly as possible.

You may be eager to clear your huge student debts or forge a medical career. Whatever your reasons, you may be tempted to grab the first job you’re offered.

However, before you sign away a chunk of your burgeoning medical career, there are aspects of an employment contract you must know and pitfalls to avoid.

This article explores what to look for and avoid in your first physician employment contract.

Common Employment Agreement Provisions Physicians Pay Attention to

Below are the key contract provisions physicians must carefully review before signing:

Employment Status

The employment designation you’re afforded by the contract can affect everything from your earning potential to your malpractice coverage. It should be one of the first provisions you seek out in the contract. Are you a full-time employee or an independent contractor? Partner or shareholder? This provision spells it out.

Guarantees Related to Income

As mentioned above, your employment status directly affects your income potential. For example, full-time employees have a better chance at income stability than contractors working locum tenens.

If you’re designated as an independent contractor, your contract should provide an income guarantee. This provision guarantees you’ll receive an agreed monthly amount after the hospital recovers its operational expenses. Keep in mind that income guarantees go both ways, and you can end up owing the hospital money.

Student Loan Assistance Clause

If you’re being crushed under the burden of your student loan debt, consider pushing for the inclusion of such a clause in your contract. Many employers offer part payment of a new employee’s student loans in exchange for the employee working for them for a specific period (usually years). It’s an excellent option if you’re thinking long-term.

Malpractice Insurance

The contract should spell out the type of malpractice insurance coverage (claims-made or occurrence-based) you’re entitled to, and who pays for tail coverage.

Other provisions you must look for include termination, restrictive covenants (non-competes), and duties. We explore them in more detail in our guide to physician contract negotiation.

Eight Contract Pitfalls to Avoid

While offering you a physician job, a prospective employer may go too far in trying to protect its interests. Negotiate better terms if you identify any of the following pitfalls in your contract:

1. Employment Contract Becoming Effective Upon Signing

Generally, there’s nothing inherently wrong with a contract that comes into effect the moment it’s signed. That’s how contracts are typically supposed to work.

So why is this the first pitfall to avoid?

The issue lies in the start date stipulated in the contract.

Once you sign your employment contract and it becomes effective, you’re bound by it. Even if you haven’t worked a day as a new physician employee.

This becomes problematic if you receive a better offer during the period between signing the contract and your actual start date.

For instance, if the contract includes a non-compete clause, and you get an offer from a rival practice, you’re pretty much stuck. Going to the rival medical practice will constitute a breach of contract, opening you up to legal action.

There’s also the issue of far-off start dates to consider during physician employment contract review. Too long a start date could be financially ruinous if, say, you moved for work. During the wait, you’ll have bills and a lease to service, something that may prove difficult if you don’t have significant savings.

Get around this pitfall by assessing your finances and options before signing. Don’t sign a contract if you’re still exploring other opportunities or expect better offers. Finally, if possible, get your attorney to reduce an overly-long start date during contract negotiations.

2. Non-Compete Clauses That Extend to People

A physician employment agreement may include a nonsolicitation clause that restricts you from soliciting your former employer’s patients after your contract period elapses. These contract provisions may also catch the hospital’s employees or contractors, making it difficult for you to work with people you’ve built relationships with over time.

In extreme cases, the clause may go as far as to prevent you from administering treatment to its former patients whom you treated while you were in the practice’s employ.

Such contract language is among the many red flags to avoid, as it not only takes away your autonomy, but also other people’s right to choose you as well.

Have your attorney counter such provisions during negotiations with the potential employer. You shouldn’t sign a contract that grossly interferes with the decisions made by third parties.

3. Allotments for Patient Hours but Not Admin

It’s fairly common to find that your contract obligates you to spend X number of hours working with patients while omitting how much time you can spend performing administrative duties. This omission can mean unpaid overtime doing tasks like test result reviews and referrals to other clinics/departments.

As a negotiating physician, you should push for the employer to spell out exactly how much time you’re obligated to spend on all aspects of your job. That way, you can ensure that a 40-hour week encompasses all your duties.

4. Non-Compete Clauses With Overly Broad Geographies

An employer may try to prevent you from competing with them after your departure. The commonest way they may do this is by including a non-compete clause that precludes you from working within a specified geographical distance from them for a certain number of years.

For example, the clause may obligate you to not work for a competing practice or set up your own within a few miles of your former employer’s establishment.

The inclusion of such a clause may not prove problematic if you aren’t intent on practicing within the community after leaving. However, your calculus may change if you plan to settle down and start a family in the area.

If the specified area is too broad to be reasonable, and the non-compete period is too long, you can escape from the non-compete. Even if you sign off on it during the negotiation process, the court may side with you if your attorney successfully argues that the clause is too unfair.

5. Provision Allowing Termination Before Your Notice Period Ends

Your job offer may come with a contract stipulating that the employer can terminate your employment after you give them notice.

Watch for this provision as it allows employers to avoid paying you during your notice period.

The best way to sidestep this contractual pitfall is to have an exit strategy in mind from the moment you’re given the proposed contract. That way, you won’t be caught unawares when you’re fired after providing written notice.

6. References to External Documents You Must Comply With

It’s fairly common for contracts to refer to documents that aren’t attached to them. Employee handbooks, ethical guidelines, and the like are examples of such external materials whose contents a basic contract may obligate you to comply with.

Referring to such external documents isn’t what makes a contract problematic. However, problems may arise if you aren’t provided these documents once the contracting process concludes and you join the employer’s ranks as a new physician.

The reason is that courts will consider the documents referenced in the contract as being part of its terms.

Imagine if you’re fired because of alleged misconduct on your part that you weren’t aware of. However, an employee handbook referenced such conduct as creating grounds for termination.

A judge may deem the employer as being within its right to terminate the contract since compliance with the handbook provision was included in it. This signed contract will hurt your wrongful termination suit.

You can get around this pitfall by requesting in writing that your employer furnish you with all documents included in the contract. That way, if the employer fails to do so, you have written evidence showing that you attempted to obtain copies of the documents during your time as an incoming physician.

7. Contract Expiration Dates Set Before Your Eligibility for Equity Arises

If you’re planning to join an independent physician practice that offers eligibility for future equity as a perk, pay close attention to the dates in the contract. Specifically, make sure your eligibility for equity occurs before your employment contract expires.

Some employers attract physicians with promises of partial ownership. After you sign, they might deliberately delay offering equity until after your contract expires, leaving you with nothing.

When the physician signs the contract, such an employer could deliberately wait them out by refusing to extend the equity participation offer or delaying doing so for as long as possible. In such a scenario, the freshly unemployed departing physician will leave with nothing.

You can avoid this issue by requesting that the employer fix a date for your equity offer that falls before the contract expires. This measure lets you avoid building a physician career on the false promise of earning an equity stake.

8. Broad, Subjective, or Vaguely-Worded Grounds for Termination

The contract provisions relating to termination must leave no doubt as to misconduct that can get you fired. Broad, vague, or subjective grounds for termination (e.g., besmirching the practice’s reputation) can be open to interpretation and give the employer unfettered power to fire you at a moment’s notice.

To protect yourself, ensure your contract requires the employer to provide a written termination notice with specific reasons for dismissal.

Need Help Reviewing Your Physician Contract?

Physicians Thrive is home to experts who understand the ins and outs of physician contracts. If you’re struggling to make heads and tails of what you must know before signing a contract, we’ll be your guide. Contact us to learn how we can help you navigate the pitfalls of medical employment contracts.