Can an Employer Make a Veterinarian Pay Back a Signing Bonus? | Signing Bonuses

Hi, I’m Attorney Renee Osipov with Chelle Law in Scottsdale, Arizona. We draft veterinarian employment agreements. One common question is, can we make a veterinarian pay their signing bonus? And the short answer is yes. Signing bonuses are a great way to entice veterinarians to join your practice. Suppose they’re straight out of school or moving from a different community. Then, include this in an employment agreement through a payback provision. 

There are typically one of three ways that we would address it. The first way is stating. Suppose the veterinarian leaves or terminates their agreement within 12 to 24 months. They would pay back the entire signing bonus. The second way to include this in the agreement is to, say. The veterinarian was to terminate the contract within 12 to 24 months. They would pay their signing bonus at a prorated share. That is considering their employment length with the practice.

Other Blogs of Interest

• Veterinary Independent Contractor vs. Employee: Veterinarian Employment
• Should a Veterinarian be Reimbursed for Moving Expenses?: Veterinary Practice Moving Expenses
• Can an Employer Just Terminate Your Contract? | Contract Termination

Must a Veterinarian Repay a Bonus if They Terminate the Contract? | Veterinary Bonuses in an Agreement

Is it likely that a veterinarian must pay their bonuses if they terminate their employment contract early? Generally, the answer is yes, but it depends on your employment agreement and the professional benefits offered whether they pay for the bonus. Typically, when you receive a bonus, they go by many different names:

• Signing bonus
• Sign-on bonus
• Commencement bonus
• Relocation bonus
• Relocation expenses bonus. 

Those are a big lump sum you receive as your income initially. That is either when you sign or when you start your employment. And typically, they always have some payback provision or forgiveness period for a bonus. And that’s anywhere from one to three years. The language in a typical employment contract would state if you terminated your employment within one to three years. You’ll have to pay either the total amount or a prorated bonus amount, depending on the length of your employment.

Do You Get a Retention Bonus?

It is serious because signing bonuses for veterinarians right now is very high. That’s a large amount of money, over 25,000 usually. And when you receive that bonus, it’s considered income. There’s a tax payment off the top. So, you’re not even receiving the full bonus that you now are promising to pay. You want to be very careful about what you’re signing. Again, one to three years is usually the time frame. Sometimes it’s for the term of the contract, and sometimes it’s shorter. With our clients, I suggest limiting it to either one year or getting that amount prorated. So, each month you stay employed with the practice, a portion of that bonus gets forgiven. If you’re there half the time, you only have to pay half the bonus.

So, yes, it’s likely if you do terminate and there are bonuses that you may have to pay back early. As I said, when you’re in the negotiation process in your practice, that’s something you may want to negotiate, a shorter period of bonus forgiveness. Mainly like, one year, I think, is reasonable. But if they don’t go for that, I suggest prorating it, so you’ve fulfilled your contract. The bonus gets forgiven monthly, quarterly, or yearly. There are other bonuses. Sometimes they call CME expenses or bonuses or treat them like that. And you may have to repay that bonus. 

Bonuses You Might Payback

You may have to repay the relocation expenses as well. As I said, you may have to repay—anything considered like a retention bonus that’s different and structured differently. A retention bonus is when you receive it at the end of the year. You complete a year in the practice, then you receive that bonus. That type of bonus you’re not likely to pay. That is because the whole point of it was that you stayed for the year. You completed that requirement in your practice and got that bonus. You don’t have to pay that one back. The other thing is production bonuses or collection bonuses. Those bonuses depend on the collections or productions you bring in for the company. Typically, those are structured in that you have to produce or collect more or sometimes even double your base salary, those types of bonuses you receive.

It’s not the money upfront. They must collect first. Those bonuses, production, or collection usually don’t have to be paid back either. It depends, but you’ll likely have to pay any signing or relocation bonus you receive. That is either at the beginning of your employment or right after signing the agreement. It’ll say in your employment contract, so you should always read it carefully before signing. Try to negotiate those terms to be more favorable to you and reasonable to both sides.

Should a Veterinarian Be a W2 or a 1099?: Veterinary Independent Contractor

Is a W2 or 1099 better for a veterinarian? Let’s take what a W2 and 1099 mean and then the employment relationship between both of those. And then kind of talk about which one is probably better for the vet. First, suppose you are a W2 employee. In that case, you are an employee, not an independent contractor. You’ve signed an employment agreement. The taxes will get removed from whatever your compensation is biweekly, monthly, or whatever their pay period is. In a standard employment relationship, the benefits you’ll get would be that they’ll pay for your:

• Malpractice insurance
• Health insurance
• Vision
• Dental
• Life
• Disability
• Retirement
• License
• DEA registration, if necessary
• Credentialing

Things that Are Excluded When You’re 1099

So, they will pay for all the usual things that go into being a vet. Whereas if you are 1099, you’re an independent contractor. You signed an independent contractor agreement with the employer. You are not an employee. That means no tax deduction from your payment, so they’ll pay you. And then, ultimately, it will be your responsibility to pay the state and the federal government for any of the taxes. Now, employers generally don’t provide any of those benefits when you are an independent contractor. Sometimes, they’ll pay for the underlying malpractice insurance. However, malpractice insurance is extraordinarily reasonable for vets. It could be $300 or $400 a year for a general vet. They’ll not pay for your license, for your DEA. They won’t provide benefits.

So, no health, vision, dental, disability, life retirement. You’re just not going to get that stuff if you’re an independent contractor. Why would you be an independent contractor if you’re not going to get any of those things? Well, I guess it would come down to compensation. It would help if you made more theoretically as an independent contractor to offset not getting all those benefits. Suppose you’ll have a hundred thousand dollar offer from the employer and when you’ll be an employee. And they’re offering you all those benefits. Then they’ll offer you a hundred thousand dollars to be an independent contractor and not offer any of those benefits. It’s just not as good of an offer.

Independent Contractors Creating an LLC 

You’d create an LLC for most independent contractors and then expense all those things. Still, getting ancillary benefits is more difficult when you’re completely alone. Like, it’s tough to find health, vision, and dental. You can’t find disability, can’t get life insurance. You must also pay for your things. Most employers would pay as an independent contractor versus an employer or an employee. That is because they don’t have to pay employment tax. Employment tax is usually somewhere between 8% to 12%. So, they’re saving 12% on what your compensation is each year. They’re essentially treating you as an employee. They tell you where to go, how much you work, and who to see. So you’re a quasi-employee, and the employer is trying not to have to pay employment tax.

The IRS lists a 20-factor test to analyze whether someone is an employee or an independent contractor. So, maybe look at that and say, you’re not giving me the benefits of being an employee. Still, you require me to do everything an employee typically would do. You being an independent contractor will make sense if it’s like a side gig. So, maybe you’re just doing moonlighting work for somebody. And it’s up to you how often you’re working. That would make sense to be an independent contractor. But suppose this is like a full-time job where you’re going in five days a week and interacting with the vet tech, the front office, and all the patients. In that case, it’s unlikely that you’re an independent contractor, which doesn’t make much sense.

Choosing Between a W2 and 1099

Overall, most of the time, it would make the most sense to be an employee, so you’d get a W2. It wouldn’t make sense to get a 1099 and be an independent contractor for a full-time job. Opinions on that may vary, but I find overall, if an employer offers an independent contractor position, they’re not an independent contractor.

Veterinary Professional Contract Benefits | Veterinary Benefit Agreement

Veterinarians are in high demand. People want to do everything within their power to care for their pets. The skills that a veterinarian brings to the table are also highly prized. The supply of veterinarians is somewhat lacking. That is versus the overall demand in the market at this time. That means employers must look at ways to sweeten the deal. That is to get as many vets in their doors.

Why Employers Require Contract Agreements for Veterinarians

Many jobs in any industry require potential employees to sign a contract. That lays out the terms of employment and the benefits of coming to work at a specific facility. It’s a strategy as a means of encouraging people to accept a specific job offer that they might not have otherwise. When the benefits are on the table, it’s easier for people to see why they work for a specific employer they’ve considered. 

Veterinarians should sign a contract of employment before they can begin their work. After all, the work veterinarians do is so delicate and sensitive that no aspect of it can be left up to chance. The employer needs to know beyond the shadow of a doubt. What are they getting when they offer employment to a veterinarian?

The plus side for incoming vets is seeing some of the benefits they’ll receive. They are on paper in a way that clarifies what they should expect. 

Benefits of Veterinarian Contracts

There are many upsides to signing a veterinarian contract. Not the least is the fact that it can provide much-needed stability to the veterinarian.

Many veterinarian contracts are due for 12 months or longer. Thus, veterinarians can feel confident that they’ll get employed at a specific facility. That’s for at least a year if they don’t do anything egregious that would nullify the contract. 

We also want to explore some additional upsides to veterinarian contracts. That is to clarify why these documents are so important to so many people. 

Professional Liability Insurance

No matter how talented someone is at their job, there’s always a risk that something could go wrong. Veterinary Practice News explains why to encourage vets to purchase protection that’ll keep them and their practice safe: 

• As claims become more common and damages rise, defending against malpractice claims becomes a more expensive and necessary concern for veterinary practices. Veterinarians commonly purchase professional liability (malpractice) insurance to guard against the expense of defending against such claims.

• Suppose an employer can add professional liability insurance as a benefit to signing the contract. In that case, this is all upside for the veterinarian. It means they may not have to pay for this insurance out of their pocket. That is not unless they want supplemental coverage beyond what the employer provides. 

• Clients are often very particular about how their pets are taken care of. They may feel they have a claim against you if something goes wrong with their pet’s care. All vets considering new employment should speak with a veterinary contract lawyer. About reviewing the paperwork, they have been asked to sign to ensure. It includes extensive liability insurance protections. 

Retirement Accounts

Everyone must think about their financial future as they are still actively working. Preparing for the fact that you won’t be able to practice as you do now someday. It’s a wise practice simply because it’s the reality of the situation. It would help if you prepared for the day when you are past the age where you can work. And need to rely on the savings accumulated throughout your working life. 

A 401(k) plan for veterinarians should be automatic in any contract they expect to sign. It’s to say that any veterinarian thinks about signing up for a job with a given employer. He should recognize that the employer needs to offer a 401(k) plan to get considered.

PTO and Sick Days

Veterinarians considering accepting a new job may want to give special consideration to the personal time off (PTO) and sick days allotted. The reason? Because they must have the opportunity to establish some work/life balance in their existence. 

A burnout crisis is sweeping through the practice as the number of clients continues to grow. Many vets must practice far more hours under far more challenging conditions than they normally would. Given all of this, it’s clear that vets need to catch some break. They’re fine to recover from the onslaught that is their job right now. 

When looking over a contract, veterinarians should see how their time off breaks down into different categories, such as:

• Sick days
• Vacation days
• Personal time off (PTO)
• Flex time
• Holidays

Employers’ definitions vary for how they look at the time provided to their employees to take care of what they need. It’s important to understand those definitions. That’s before signing an employment or independent contractor agreement.

Discounted or Free Services

It would be unusual for a veterinarian not to have a pet (or two, or three!) of their own. Thus, it’s a reasonable assumption that the vet may receive special discounts or even free services from their employer. They may not want to practice on their pet for understandable reasons. Still, they may have the opportunity to receive veterinary care from a co-worker who can help them out. Their employer should discount this service as part of the terms of their employment. 

It may seem like a small thing. But it makes a big difference in busy veterinarians’ lives with multiple pets they need to take care of. Getting a little break on those services can be the cherry on top. 

Is a 2-Year Non-Compete for Veterinarians | Veterinary Practice

You’ll have signed an employment contract agreement if you’re an employee. And in that employment contract agreement, it’ll contain restrictive covenants within your practice. And restrictive covenants are things you can’t do in your practice either during or after the contract gets terminated. Typical restrictive covenants in a veterinary practice employment contract include:

• A non-disparagement clause.
• A non-solicitation agreement.
• Confidentiality provisions.
• A non-compete

A non-compete essentially prohibits the vet from operating for a period within a specific geographic radius of their workplace. In the contract, let’s say you practice as a general vet. It’ll say you can’t practice as a general veterinarian for one year within 15 miles of your primary practice location.

What the Veterinarian Employee Noncompete Agreements Says

Let’s talk about some sneaky things the employer tries to do in a non-compete. First, vets can do multiple things. They can do emergency medicine. They could do urgent care, and they could do general vet issues. You want to ensure that the specialty written into the contracts is what you’re doing for that employer. If you’re doing emergency medicine, you don’t want them prohibiting you from being a general vet after the contract terminates. You want as many options as possible when the contract ends, so you don’t have to move. Prohibiting things that you didn’t even do for that employer doesn’t make a lot of sense to me. So, you want to ensure that it doesn’t say you can’t practice veterinary medicine. It needs to be specific to what you were doing for that employer.

For some specialists, say you’re a radiologist, there’s going to be no way around that. But it needs to state what you’re explicitly doing for that employer, nothing more. Regarding time, most non-competes for vet’s practice are usually between one and two years. Suppose you have a non-compete for three or five years. Then, that is probably not enforceable and completely unreasonable. Somewhere between one to two years is the ideal range. One year would be better than two. But it’s not uncommon to see both of those lengths in the contract. So, is two years too long for a non-compete? Ideally, you would want one, but two years, I think, could be considered reasonable in some states.

Geographic Restriction for Veterinary Practice Employment

Let’s discuss geographic restriction. Suppose you’re working in two locations for 5 to 15 miles. That’s a decent range. And these corporate-owned veterinary practices continue to gobble up these veterinarian-owned animal care practices. With that in mind, you must ensure that the geographic restriction only attaches to your workplaces. Let’s say you’re in a big city and a business-owned vet practice owns ten clinics. Suppose you have a 10-mile non-compete from 10 clinics. Then, that could knock you out of a city. It’s more reasonable if it’s just 10 miles from where you worked. 

It might not be very pleasant to go outside that radius for however long non-compete lasts. However, you’ll at least have other opportunities to practice. Suppose you’re with a huge business-owned practice. In that case, you must ensure that the non-compete only applies to your primary practice locations. No more than two. Only one or two at most. Some contracts don’t just do a radius but also counties. You can’t practice in this or any contiguous counties. Any counties that touch your county would be unreasonable. Now, it’s going to depend upon the setting. Suppose you’re in an urban environment. Then, 10 miles could knock out hundreds of opportunities.

If you’re in a rural community, there may be no other opportunities within 10 miles of your clinic. Consider that. The larger the city, the more opportunities. The smaller the radius, the more reasonable. Why does it matter? Suppose you grew up in a town, and your kids attend school there. Your family has deep ties to the community. The last thing you’d want is to move out. Maybe it’s just impossible. It’s imperative to focus on the geographic limitation and how many places it attaches to in that scenario. And then also, how long it is. 

Negotiation With the Employer about Non-Compete in the Agreement

You’d want to aim for one year rather than two. That way, you have the shortest inconvenience if you must practice outside of the restriction for that one year. Now, how do you negotiate employee non-compete agreements? It would help if you asked for what you want. If they come to you and offer two years and 50 miles from your primary practice location, that’s likely unenforceable. Undoubtedly unreasonable. Say you want a one-year non-compete with a 10-mile restriction. From the two places, I generate most of my charges. Some big corporate-vet practices may say oh, and we can’t change the non-compete. They can change it. They don’t want to.

You have to decide what you’ll do if they say take it or leave it. For some people, it’s the most important thing when negotiating contracts. For others, it doesn’t matter at all. Maybe you move to the community for a job but don’t plan to stay there after. Then you want to focus on negotiating more essential things. And don’t bother mentioning the non-compete. It depends upon the vet, where they’re at in life, and whether they have ties to the community. To determine the amount of capital they want to put into negotiating the terms of the non-compete. There are states where non-competes are wholly unenforceable for providers. There’s only a handful of them. 

So, you’re likely in a state where non-competes are enforceable. I get comments like, hey, I talked to a colleague. They said non-competes are completely unenforceable everywhere. For vets, that’s not true. They’re, in most states, if they’re reasonable. Whether something is reasonable or not varies on the viewer. But I would consider never signing a contract agreement. That is, if expecting something not to be enforceable and always trying to negotiate better terms.