What are the key components of a contract?
What is the purpose of a contract?
How long should a contract last?
What are the common pitfalls of the initial contract?
What should I make sure is in a contract?
How do I negotiate?
When should I get an attorney involved
How do I know when to walk away and look elsewhere?
What are the key components of a contract?
A contract should be a summary of what is discussed and reviewed in other correspondence and the interview. As a legal document it supersedes and may not always accurately reflect what has preceded.
Review it carefully.
An employment contract will cover both economic and non-economic issues. The most important economic issue will be your compensation. Understand thoroughly how it is determined, and what influences it. The most important non-economic issues are frequently restrictive covenants or non-compete clauses. They restrict physicians from engaging in practice within a specified geographic area for a specified period of time should he or she leave the practice.
Most contracts will cover the at least the following issues:
Economic
1. Base salary, how and when it is paid
2. Bonus structure
3. Malpractice coverage and amounts
4. Health, disability, and life insurance
5. Retirement plan participation
6. How receipts and expenses are tracked and attributed
7. Buy in/out provisions
Non-economic
1. Restrictive covenants
2. Staff, educational, practice support provided
3. Vacation and leave policy
4. Principles of practice
5. Workweek and coverage expectations
6. Outside employment
7. Administrative and partnership hierarchy
8. Partnership and voting provisions
9. Termination policy and proceedings
10. Changes to the contract
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What is the purpose of a contract?
Contracts are intended to specify the expectations of the parties signing them. It will also specify recourse if either party fails to honor one or more provisions of the contract. They are written to protect the interests of the party sponsoring the contract, thereby limiting their liability. As such, particularly with the original draft, it may not equally protect the interests of both the employer and employed physician. A good contract will be fair to both parties. It may take negotiation to reach that equity.
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How long should a contract last?
A contact should give a newly employed physician ample time to succeed. It should also permit either party to get out of an untenable relationship with reasonable alacrity. Pragmatically, a newly employed physician should seek a 3-year economic commitment to balance salary advanced against receipts generated. Either party will generally desire the option to terminate the contract with or without cause with 90-360 days notice..23
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What are the common pitfalls of the initial contract?
There are several common pitfalls in contracts. The first is non-compete clauses or restrictive covenants. These restrict your ability to practice in proximity if you leave the employment of the group. Avoid them. If unavoidable, negotiate for a radius of no more than 5 miles, and a period of no greater than 2 years.
Second, pay careful attention to what is included in compensation, and how overhead costs are calculated and tracked. What happens to honorariums, and income generating moonlighting? Is compensation and overhead based on accrued charges, or receipts? What happens if the practice errors in billing, or fails to diligently pursue accounts receivable?
Third, make sure contract termination and grievance policies are fair. Define expectations of you and by you in as much detail as possible. How equitably is call distributed? Clarify under what circumstances the contract can be changed.
Lastly, make sure the contract provides you with the opportunity to succeed. Avoid situations that require you negate expenses experienced by the practice on your behalf in less than a 2-3 year time frame.
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What should I make sure is in a contract?
If it is important to you, get it in writing before you sign. No matter what was discussed in interviews, if it isn’t in writing, it will be difficult to enforce. Don’t assume anything. A good contract will cover all the issues you raised in the interview and other correspondence. Your leverage is lost once the contract is signed, at least until it is due for renewal.
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How do I negotiate?
There are several rules of thumb in negotiating a contract. Treat everything as negotiable until told otherwise. You don’t have to sign the first draft. Figure out your interests. Understand theirs. Seek fairness. Identify options. Focus on issues, not people. Know what you can live with, what your aspirations are. Sometimes it is wise to ask for concessions in several areas that are less important and can be relinquished gracefully while protecting contract concessions of greater value to you. Your leverage exists during contract negotiations, and is lost once you sign. Consider asking for a signing bonus. Know when to walk away.
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When should I get an attorney involved?
As soon as you receive a contract to review, it is time to get competent legal advice from an attorney used to working with physicians and contracts. Local medical societies can frequently suggest names. A contract is a legal document containing many terms that require a professional to interpret. They can be quite complicated. You will have to live with it throughout the term defined by the contract. A competent attorney knows how to guide your negotiations. An attorney skilled in employment agreements can both interpret contract language, and make suggestions for changes beneficial to you.
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How do I know when to walk away and look elsewhere?
Having your attorney involved from early on in the contact negotiation helps you know when it is time to quit asking for concessions. Be clear to yourself and your prospective employer what the make or break issues for the contract are to you. If you are not making progress toward securing those provisions, and your attorney tells you your position is fair, it is probably time to seek opportunity elsewhere.
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