Contract Negotiation: Employment Contract Guidelines

It is Important
  • to find a lawyer who specializes in employment contracts

In most cases, negotiating a contract is completely unfamiliar territory. It is important that you find a lawyer who specializes in employment contracts, whether or not you have knowledge on the subject.

Below are some terms that you will see in your contract.

  1. Recitals
    Names of the parties involved (ex: you, the practice, the hospital, and the like). The number and specialties of physicians in the group and whether a partnership track will be offered can also be found in this section.
  2. Time/duration of the contract...
    Time/duration of the contract and the number of years to full partnership.
  3. Obligation of Employer
    This section explains what the employer is agreeing to provide you with (ex: benefits, compensation, insurance).
  4. Compensation:
    This is very important, as it is the bulk of the contract.
    First year annual salary

    Salary can be handled in two different ways. It is important that you can distinguish between them and understand how you are being paid.

    For a salaried position, the physician will receive a set salary from the employer. In this case, the physician has no fiduciary responsibility toward the organization paying his or her salary.

    As an alternative to a salaried position, a hospital will sometimes offer an income guarantee to lessen the risk of opening a practice. While this method guarantees a certain income level for a set amount of time, the physician must take on fiduciary responsibility to repay the money later.

    Bonus

    Your contract should include verbiage about a bonus: when it starts, how it is paid out (quarterly, biannually, etc.), and how much the bonus is. Do your best to get a rough estimate.

    Benefits

    Below are things benefits that should be discussed in your contract, although it is important to remember that some are offered on a case-by-case basis.

    • Automobile — if applicable
    • Vacation — Does this include CME?
    • Medical malpractice insurance — Does this include tail coverage?
    • Health Insurance — Does this include me and my family?
    • Life insurance — What type? What is the policy amount?
    • Disability insurance — What type? What is the policy amount?
    • Library allowance/society allowance — What is my allowance?
    • Continuing Medical Education allowance — How much is my allowance? How many days are allotted?
    Relocation allowance

    As of 2021, the average relocation allowance for physicians was $10,634. Below are two ways that your relocation allowance can be paid out.

    Lump Sum — The company will give you the full amount before your move so you are able to cover your expenses. This will be counted as taxable income unless you itemize and account for all of your expenses on your tax forms.

    Expense Reimbursement — You will cover your own moving expenses during relocation and the company will reimburse you later on.

  5. Obligation of Physician
    A description of services to be provided by the physician. This is very important because you will be held to it once you begin employment. Be sure you are not responsible for services you do not wish to provide (administrative, managerial, marketing).
  6. Restrictive Covenant
    The contract most likely also contains a restrictive covenant, barring you from practice in the area if you decide to move on. This should include the amount of time that has to elapse before you can practice in a certain mileage area around the practice. A non-solicitation agreement is an alternative to a restrictive covenant. It would allow you to stay in the area, but prohibits you from taking patients with you if you leave.
  7. Liquidated Damage Clause
    This is sometimes offered in addition to a restrictive covenant, and would allow you to buy your way out of your restrictive covenant for a set dollar amount.
  8. Confidentiality Provision
    An agreement to keep employer's information confidential. This is standard in almost all employment contracts for all types of jobs (not just physician-related).
  9. Assignment and Consent Clause
    Under this clause, you are consenting that your contract is assignable to another company if a change of ownership occurs. It is simply saying that if another company buys the employer you work for, they can assign your contract to them to be carried out. However, it is not possible for you to do the same. You can not assign your contract to another physician or company.
  10. Breach Clause
    This states the conditions under which the contract will be voided. Items included would be, but are not limited to, death, disability, or loss of income.
  11. Integration Clause
    This states how the agreement will be affected by other contracts the employer may already have in place. For example, the agreement could be subject to a contract the group has with a hospital or an HMO. If one of those becomes void, so would your contract.
  12. Governing Clause
    Each state has different contract laws. This clause simply states which state contract laws the contract is governed by.
  13. Termination Clause
    This clause notes the conditions under which you can be terminated. You can usually quit any time you would like (as long as you give notice as required — usually 90-120 days), but be sure to find out if you will owe any money if you do not fulfill the terms of the agreement.

Contract Negotiation

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