As physicians continue to trend towards an employment model, the employment agreements physicians are asked to sign by hiring practices and facilities are likewise becoming increasingly standardized and more difficult to negotiate. Physicians presented with a proposed employment agreement should ensure that they understand the terms of the agreement and seek the advice of legal counsel before signing. This article discusses some of the key provisions commonly found in employment agreements which can significantly impact the physician’s employment, as well as common pitfalls physicians should avoid if possible.
Scope of Duties, Responsibilities, and Scheduling. The agreement should adequately describe the duties and responsibilities the physician is expected to fulfill as part of his or her employment, including any administrative, supervision, and/or non-clinical responsibilities that may be required. The agreement should specify the total work hours and any amount of call coverage the physician may be required to work. The physician should also understand how the physician’s schedule will be determined, including whether the employer utilizes any seniority system or other procedure for requesting time off or preparing the schedule. If the employer has offices or facilities in multiple locations, the physician should understand at which location(s) he or is expected to work and whether those location(s) may be subject to change.
Compensation and Sign-On Bonuses/Incentive Payments. The agreement should identify the physician’s compensation to be paid by the employer for services rendered by the physician during his or her employment. If the physician’s compensation (including any periodic or annual bonuses) follows a certain model or formula, the model or formula should be specified in the agreement, with sample calculations if necessary or appropriate for clarification purposes. Physicians, and particularly physicians with several years of experience or who are practicing in high-income specialties, should be mindful of provisions which impose caps on compensations, such as a certain percentile of a national survey. Likewise, physicians who are offered any sign- on bonus or other incentive payment to become employed at a practice or facility should understand the amount of the bonus or incentive, how and when the bonus or incentive will be paid, and whether any amount of the bonus or incentive may be subject to repayment under any circumstances.
Agreement Not to Compete. Michigan law generally enforces physician non-compete agreements, provided (1) they are reasonable in duration, scope, and geographic area, and (2) they protect the employer’s reasonable competitive business interests. Physicians should understand whether their agreement contains a non-compete provision which may limit his or her ability to practice medicine during their employment and/or after their employment terminates, including the terms of the provision and under what circumstances the provision applies. Although non-compete agreements which are exceedingly vague or broad may not be enforceable, physicians should not sign an agreement assuming a non-compete provision in the agreement is unenforceable.
Professional Liability Insurance. The agreement should specify who is responsible for obtaining and maintaining professional liability insurance for claims made against the physicians for medical services rendered during the physician’s employment, including the amount of coverage, and which party bears the expense. If an employer will be furnishing “claims made” professional liability insurance, the agreement should also specify whether the employer will also maintain post-termination or “tail” coverage for the physician at its expense.
Indemnification. Physicians should be mindful of any provisions which may require the physician to indemnify the employer under any circumstances, as well as any limitations of such indemnification. For example, it is increasingly common for employment agreements to require an employed physician to indemnify the employer for his or her acts and omissions, such as liability in a medical malpractice claim which exceeds the limits of available insurance coverage, or for disallowed reimbursement of services rendered by the physician following a post-payment audit by an insurer.
If a physician has concerns with the terms of his or her employment agreement, the physician should discuss those concerns with experienced legal counsel who can advise the physician regarding his or her concerns, identify other provisions in the agreement in addition to the provisions discussed above that may materially affect the physician, and assist with any contract negotiations or changes that may be necessary. If an employer will not negotiate or make any requested changes to the employment agreement, the physician will need to decide whether to proceed with the employment opportunity or to simply walk away.
This article originally appeared in the Fourth Quarter 2021 edition of the Detroit Medical News.
