QUESTION: I’m getting ready to look for my first job as an emergency physician. What should I know about negotiating my first employment contract?
Answer: This is a great question. My response is fairly brief and not intended to give adequate treatment to employment or independent contractor agreements but merely to provide some practical tips that every emergency physician should be aware of regarding employment or independent contractor agreements.
- Contracts should be written in plain English. The concept of writing contracts with the overly laborious use of the Queen’s English has long since passed. Although you shouldn’t be expected to fully understand the legal effect of every legal term, you should be able to read the contract and come away with a general understanding of the intent. If you don’t understand it, don’t sign it. It’s not a sign of weakness to ask for clarification. There’s a pretty good chance that the person who obtained it from an attorney—or, worse, from the Internet—can’t explain it either.
- Professional liability coverage should be expected but not assumed. You should either have occurrence-based medical malpractice coverage or claims-made coverage with a tail. Basically, occurrence-based coverage provides you coverage for any occurrence during the policy duration regardless of when the claim is filed. So if you work for a group in 2017, leave in 2018, and are sued in 2020, you will be covered by an occurrence-based policy that was for the coverage year 2017. However, if you had a claims-made policy and didn’t have a tail, the claim would not be covered. Claims-made is a face-value term. When a claim is made, the claim is covered if your policy is in force. However, when the policy ends, no prior acts are covered. So if you work for a group in 2017 and leave in 2018, any claims filed after the coverage year 2017 would not be covered unless you have tail coverage, which covers those prior acts. These terms must be clear in your agreement.
- Integration is a very important concept in contract law. An integrated agreement is the entire agreement. When you sign your employment or independent contractor agreement, integration ensures that both parties understand they are bound by the terms in the contract and of that agreement only. In other words, if someone promised you something but it’s not in the integrated agreement, they have no legal obligation to perform to that promise.
- Outside activities can be limited by a future employer. This is seen more often in academic contracts. A clause may exist limiting time spent on outside pursuits or discouraging such conduct by requiring that earnings for such activities be remitted to the employer. At some places, this may be required. However, if you are uncomfortable, ask to have that clause removed or amended. For instance, if you are already engaged in writing a book or teaching advanced cardiac life support, the compromise could be to have those activities excluded.
- Sign-on (signing) bonuses can be tricky. Don’t focus on the cash; focus on the terms. Spending money is generally pretty easy, but paying money back that you don’t have isn’t. Pay close attention to the repayment terms. How do you fulfill your obligations, and what happens if you leave prior to the fulfillment date? Chances are, if you bail early, they are going to want their money back. My advice is to save that money until you have fulfilled that portion of your agreement. You don’t want to finance the repayment of your sign-on bonus if you decide you want to leave prematurely. If you do spend it, make certain you save enough to cover your tax liability the following year.
- Noncompete clauses and restrictive covenants are very common. They are not unique to health care and certainly not to emergency medicine. The intended goal is to protect a business interest. I think most would agree that if a group, big or small, spends time, money, and other resources to obtain an ED contract, staff and manage that department, and develop a long-standing relationship with the hospital, they are entitled to protect their investment from one of their employees.
However, the extent of that business interest and that of the restrictions placed on the physician are the greatest points of contention. Many would agree that the business interest, in most cases, begins and ends at the front door of that hospital. In other words, a noncompete that disallows a physician to work anywhere in the state would be far beyond a reasonable business interest. The enforceability of such clauses varies from state to state and with the specific circumstances of a given case. It isn’t right or wrong to have noncompete clauses, to sign them, or to not sign them. Just make certain that you can live with whatever restrictions are listed when and if you choose to separate.
- Contract reviews are worth the relatively minimal amount you’ll pay for them. Although you are likely to spend $500 to $1,000 for a contract review, this will ensure that the rights and obligations of both parties are thoroughly understood by you and that your interests are met. I have heard from many residents that their attendings have offered to perform such reviews. That certainly may be of value but shouldn’t be your only source of input. If attendings have no formal education in contract law, what would qualify them to opine on such matters? Just because someone has been around the block a few times and has read many contracts does not qualify them to interpret a legal document and its full impact on the parties. When you have a leaky faucet, who do you call? Chances are, you call a plumber. When you need legal advice, call a lawyer.
Philosophers have said that funerals are for the living, not the dead. Contracts are similar in that they are most important when you’re leaving, not when you’re staying. Early in your employment, the relationship is often at its best, so it’s easy not to become overly worried about the details of an agreement. However, you should read your agreement from the perspective you’ll have if and when you leave. If you can’t live with the terms, don’t sign the agreement.