Basic Items in Employment Contracts

For many doctors, negotiating an employment contract is completely unfamiliar territory. If you do not know much about this subject, it is advisable to find a lawyer who specializes in employment contracts to look the contract over for you. However, simply as a basic guideline, your contract will most likely contain the following items explained in this outline.

  1. Recitals: Names of the parties involved, e.g., you, the practice, the hospital, and the like. The number and specialties of the physicians in the group and whether a partnership track will be offered will also be contained in this section.
  2. 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, e.g., compensation, benefits, insurance.
  4. Compensation: This is very important, as it is the bulk of the contract.
    First year annual salary

    Salary can be handled in one of two ways. It is important to distinguish between the two and understand the method in which your salary is being paid.

    Salaried Position: In this form of compensation, the doctor will receive a set salary from the employer. The physician is a salaried employee of the institution and has no fiduciary responsibility toward the organization paying his salary.

    Income Guarantee: Income guarantees are offered by hospitals to lessen the risk of opening a practice. This method will guarantee a certain income level for a set period of time. However, the physician must take on fiduciary responsibility to repay the money later.


    When does the bonus start? How is the bonus paid, quarterly, biannually, etc.? How much is the bonus? Attempt to gain at least a ballpark estimate.

    1. Automobile, if applicable.
    2. Vacation. Does this include CME?
    3. Medical malpractice insurance. Does this include "tail" coverage?
    4. Health insurance. For physician and family?
    5. Life insurance. What type is it? Amount?
    6. Disability insurance. What type is it? Amount?
    7. Library allowance/society allowance. Amount?
    8. Continuing Medical Education allowance. Amount and time?
    Relocation allowance

    The standard in the country is $7,000 to $12,000 which can be paid out in two ways.

    1. Lump Sum: The company will give you the full lump sum of money before your move to cover your expenses. It is important to note that this will be counted as taxable income unless you itemize and account for all of your relocation expenses on your tax forms.
    2. Expense Reimbursement: Under this method, you will cover your own expenses during relocation and the company will reimburse you afterwards.
  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. The clause 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 Company A 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, only the employer can.
  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. Arbitration Clause: This states that both parties, you and the employer, agree to settle any disputes outside the court system and settle them through an arbitrator. This also means that both sides are forfeiting their right to go to court for any dispute.
  12. 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.
  13. Governing Clause: Each state has different contract laws. This clause simply states which state contract laws the contract is governed by.
  14. Termination Clause: The contract will most likely also contain a termination clause. It will be important to note 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 30 or 60 days), but be sure to find out if you will owe any money if you do not fulfill the terms of the agreement.

These articles are included to inform you, in general, about healthcare legal issues. The information contained herein is not intended to provide solutions to individual problems. It cannot be relied on as legal advice. We caution you to not attempt to solve individual problems on the basis of this information and advise you to seek competent legal counsel to address your specific issues.

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