Is a letter of intent for a job or employment binding? The short answer is probably not when a professional is looking for a new position. The employer may state that before we give you an employment contract, we’d like you to sign a letter of intent or offer letter. And then, that letter of intent will outline the main points of the employment relationship. Normally, in a letter of intent, you’d have the term of the contract. So, how long does it last? Maybe it terminates? What is the length of notice required if it is terminated without cause? Indeed, it will have compensation details like base salary, productivity bonuses, and commission percentage.

Letter of Intent for a Job Contents

Maybe a brief description of the benefits would be helpful. And then, if there’s a non-compete involved. If it’s a healthcare contract, maybe some details about the malpractice insurance. Quick bullet points: This is how we anticipate the employment relationship. And at that point, there may be some negotiation between the professional and the employer. For instance, if the professional wants a higher base salary or a higher percentage of collections, or whatever it is, that’s the time to negotiate. Once an agreement is reached, the professional signs the offer letter, and generally, the company will also. The company will typically draft a formal employment contract with legally binding terms. What are some reasons why someone would back out after signing an offer letter?

What May Affect the Details in a Contract?

Well, the details in a contract can significantly change when provided with more context. For instance, if the offer letter states, let’s discuss the non-compete. It may be two years and 10 miles from your primary practice location, in sales, from your sales territory, or something like that. And then, when you investigate the agreement. It may be much more prohibitive because you can’t only work in your specialty, but you also can’t work in sales in this area if you’re selling software or something like that. Then normally, non-competes would apply only to software. So, you could switch industries for a brief period and then come back if you wanted to.

However, suppose the language says you can’t work in sales during this period within a 10-mile radius or something. In that case, that could substantially change the job. Or perhaps, if there are some commission-based bonuses, it may state that if the contract terminates, A professional won’t receive any of those bonuses if they don’t get paid. And so, someone could work for an entire year, earn bonuses, and then maybe leave in month 10 of the year. They get nothing as far as bonuses go. These are a few reasons someone would be okay with an offer letter. Then maybe not with the employment agreement. Unless specifically stated in the offer letter, the professional is not bound by language that states a binding document in some way.

What Happens When Change of Mind After Signing an Offer Letter?

It is exceedingly rare to see an offer letter with that language. Generally, it’s just, here are the basic terms of employment. Then it moves forward to an employment agreement. Until the professional signs the employment agreement. It’s still mostly a handshake. Other times, if someone received an offer letter. Find a new and better position and pay more. They’ll say, I’m not going to entertain this job anymore. I’m going to move out. In that scenario, if someone wanted to back out after signing an offer letter. Then you need to say warmly, this isn’t going to work out for me. I will pursue a different opportunity, appreciate the consideration and move on. You don’t need to give any explanation if you don’t want to, as far as why you’re doing that.

Generally, offer letters or letters of intent is not binding. And the professional is free to continue looking. Now, the last consideration is some bad blood may pop up after someone pulls out after signing an offer letter. As I said before, try to be professional and cordial about letting them know that you’re not going to move forward with that employment agreement. However, this is business; most companies understand that people sometimes change. Their minds in a competitive job environment. I wouldn’t be that concerned about that. But it may happen, so you want to avoid burning bridges if possible.

Other Blogs of Interest

• Should You Sign a Physician Letter of Intent?
• Can a Physician Sign Multiple Letters of Intent?
• What Benefits Should Go In a Physician Assistant Offer Letter? | PA Offer Letter Benefits

Employment Agreement for Physicians: Is a Physician Letter of Intent Binding?

In the employment arena, these letters of intent go far. We’d have an employment agreement if you signed the letter of intent. That would start with a new job. Briefly, in general, is a letter of intent binding? No. The only way a letter of intent would be binding is if there is a language that states this letter of intent is binding. I don’t recall seeing something like that before. The reason why it’s essential for the physician not to sign a letter of intent that states binding. Because in the employment agreement, the actual long contract that the physician gets sometimes can be substantially different. Maybe the context provided by the employment agreement can do a job. A job which, at the basic level, seemed great. Then once you read the fine print, it’s not so great.

Before You Sign an Offer Letter

So, it’s always important for the physician to know. It is Even if you come to terms on the letter of intent like compensation, benefits, bonuses, termination notice, or non-compete. Even if you agree to all those things, getting the employment agreement is different. Either the terms are substantially different, or perhaps the way they worded them made them substantially different. In that scenario, don’t sign the employment agreement. Due to those factors, you can always negotiate, even after you sign a letter of intent. Maybe the letter of intent states yes. A non-compete lasts one year, but it doesn’t list the geographic limitation. You get the contract, saying it’s a one-year non-compete. Okay, great. And then it says, but it’s 50 miles from every location the employer has in the state or something crazy like that.

Well, no physician will sign, or at least they shouldn’t, a non-compete like that. Although the letter of intent is okay at first glance, this is a one-year non-compete. That seems fair. But it’s not so fair when you get into the details of it. Or perhaps there’s language about productivity. In this case, maybe you get 25% of net-collections over a certain amount you collect in a month. Okay, well, that sounds great. 

And then you talked to the employer about the volume, meaning. What’s the average a physician makes in my specialty here? And they say no one’s ever got the productivity bonus. Okay, that looks great on 11 and 10, but in practice, not so great. Or maybe in the agreement, they say it’s an initial one-year term. But then, when you investigate the agreement’s language, it automatically renews. 

Is a Letter of Intent Still a Binding Employment Contract?

There’s no ability to terminate the contract without cause. Then the physician theoretically could just be stuck in a loop without the ability to get out of the contract. That’s just something that physicians must work out in advance. So, is a letter of intent binding for a physician? Typically, no, it’s not.

If there is a language that states it is binding, run the other way and get a new job that isn’t trying to take advantage of you. Someone would rarely put language in there without in-depth understanding. Most business owners are at least savvy enough. To understand that forcing someone to sign a binding letter of intent without seeing the actual employment contract is terrible. So, anyway, keep that in mind before you sign anything.

Is a Letter of Intent for Employment Binding? 

The short answer is probably not. It is how the process would work when a professional is looking for a new position. The employer may state before they give you an employment contract. They’d like you to sign a letter of intent, also referred to as an offer letter. And then, that letter of intent will outline the main points of the employment relationship. Normally, in a letter of intent, you’d have the term of the contract. So, how long does it last? Maybe how can it be terminated? If it has without cause termination, what’s the length of notice needed. Certainly, it’s going to have compensation details. These include base salary, productivity bonuses, and commission percentage, which will also be listed.

What to Look on Sample Physician Letter of Intent

Maybe a brief description of the benefits. And then if there’s a non-compete involved if it’s a healthcare contract. Perhaps some details about malpractice insurance. Kind of quick bullet points of, alright, this is what we expect the employment relationship to be. And at that point, there may be some negotiation between the professional and the employer. For instance, if the professional wants a higher base salary or a higher percentage of collections, or whatever it is, that’s the time to negotiate. And then, once it reaches an agreement, the professional signs the offer letter. Generally, the company will as well. And then, at that point, the company will usually prepare an actual employment agreement with the binding terms. What are some reasons why someone would back out after signing an offer letter?

Well, providing more context, a contract’s details can significantly change. For instance, if the offer letter states, let’s discuss the non-compete. It may state, oh, it’s two years and 10 miles from your primary practice location. In sales, from your sales territory, something like that. And then, when you investigate the agreement. It may be much more prohibitive in that you can’t. Not only work in your specialty, but you can’t work in sales in this area if you’re selling software or something like that. Typically, non-competes would apply only to software. So, you could switch industries for a brief period and then come back if you wanted to.

Can you Negotiate After Signing a Letter of Intent?

Can a professional negotiate after signing a letter of intent? In short, yes, obviously, you can. Let’s talk about what a letter of intent is. The differences between that and an employment contract. Then the areas of negotiation after that. A letter of intent, also called an offer letter, is simply a brief letter outlining the employment relationship’s main terms. Normally, it would be the term of the agreement. So how long does it last if there’s without cause termination? What is the notice requirement? Any compensation detail like base salary. Those details will be in some productivity, commission-based, net collections.

Maybe a brief description of the benefits: health, vision, dental, life, disability, retirement, that type of thing. And then, if there are any restrictive covenants, a non-compete, a non-solicit, something like that. And if they’re a healthcare provider, if there’s what malpractice insurance offers. Suppose they must pay for tail insurance. There’s just a brief description of the main points of the contract. And so, the employer, if they do make the professional sign a letter of intent in advance. Once they get those locked in before offering an employment contract. Many employers will go straight to the employment contract. Maybe they’ll have a brief discussion with the potential employee. About, alright, here’s what we’re thinking about all those things. And then, if there is verbal agreement from the professional, yes, I’m okay with those.

Negotiating for an Employment Agreement

Let’s move forward with an employment agreement. The employer will then present the employment agreement, and negotiation can occur. Suppose you have agreed on the terms of offer letters or a letters of intent. In that case, you certainly can negotiate once you receive the employment contract for several reasons. Suppose the offer letter briefly describes the employment relationship terms when you have seen the actual language many times. In that case, it can completely change what you were expecting. For instance, there will be a non-compete in the agreement that doesn’t give the description. Then when you read the terms of the non-compete, instead of expecting maybe a one-year non-compete with a 10-mile radius, it’s a three-year non-compete with a 50-mile radius. 

So, that substantially changes whether an offer is worth it or not. And often, if there is foul language in the agreement, it can also shift the compensation. For instance, let’s say a professional is okay making 200,000 a year. But if they have these bad restrictive covenants after the contract ends, 200,000 may not be worth it. Maybe they’ll say if I’m going to accept these restrictive covenants. Then I need more compensation during the year to make it worthwhile. Although you’ve agreed on the terms of the offer letter. It doesn’t mean you can’t return to the employer unless explicitly stated in the offer letter. The letter of intent that it is binding, which rarely happens.

Reasonable Considerations in an Employment Contract

Normally, that would only happen in maybe an academic position. You’re free to negotiate up until signing the employment agreement. Now, it may tick off the employer that you agreed to essential terms. Then after the fact. You came back at them and said, I know we agreed to this, but we need to revisit this. However, no professional wants to enter an employment relationship where they’re unhappy with the terms. Better to risk off the employer with terms that favor the employee versus just accepting an agreement that you’re unhappy. And usually, that’s going to spiral. Let’s say, alright, well, I agreed to terms in the offer letter. It does change once I read the actual employment agreement. And then, at that point, I’m like, ah, I don’t want to go back to them.

I’m just stuck with it. Well, you will have, or at least you will likely have. Some negative attitude spills over once you begin with the employer. And maybe you’re always thinking, ah, I’m underpaid, or this non-compete is bad, or the benefits are below what I was expecting. So, even if you risk the employer being annoyed by continued negotiation. The professional is free to continue, and they should. The bonus structure is good if it’s a reasonable offer and the salary is good. Then you continuously come back to the employer asking for more and more. At some point, they’ll yank the offer and move elsewhere. That’s always a consideration when talking to a professional about negotiating a contract. Yes, we want to ask for more, but it needs to be reasonable.

When Can an Employer Yank the Offers?

Suppose you’re asking for insane increases in certain things many times. In that case. I can tell the professional, look, if you come back at them with these things, they’re going to say no. They’re likely going to yank the offers just because you’re coming off as unreasonable. So, it’s good to know the industry standards in all those terms. That way, when you ask for the increases, you have some backing of. Well, these are the industry standards. And if you don’t want to meet the industry standard. I’m going to move on to a better opportunity. So, yes, you can negotiate after signing a letter of intent or an offer letter. And, in fact, you probably should. Once you read the language of the employment agreement, it changes the opportunity.

Can You Reject a Letter of Intent?

Can you reject a letter of intent? The quick answer is yes. You certainly can, and should, if you’re unhappy with the terms of it. A letter of intent, also known as an offer letter, can be provided once negotiations or discussions about a position move forward. Normally, it would work if a potential candidate would find out about a job. Either through a job listing or word of mouth, or maybe they were reached out through a recruiter. There’s a discussion of the main point of the position. Like the salary, benefits, that type of thing, and location. And once there’s interest on both sides, many employers will offer the letter of intent or the offer letter.

And that is a description of the main points of the employment relationship. In most offer letters, there will be the start date, location, and contract length. This is called the term, maybe a brief discussion on how both parties can terminate the contract, compensation, so is there a base salary? Are there bonus opportunities? Is it net collections, commission-based RVUs? It would be a brief description. It wouldn’t go into a long four paragraphs about comp. If malpractice insurance is necessary, who pays for that, and then who pays for the tail insurance if that’s necessary? Are there restrictive covenants? The restrictive covenants are normally a non-disparagement, a non-solicit, a non-compete, and it might go through briefly like this is how long go last.

What Is Inside an Offer Letter?

And maybe this is the geographic restriction associated with the non-compete and then a brief description of the benefits like health, vision, life, dental, disability, retirement, and maybe expenses. What expenses is the employer going to pay for? That’s what would normally be in an offer letter. The candidate, when viewing this letter, if the terms of it are unfavorable, or maybe not what the candidate was looking for, they can say, no, I’m not interested in this. I’m not going to sign this. I wouldn’t suggest just saying, no, I’m not taking this job. Take a hike. It would simply make sense to counter. You can say, I’m not going to sign this offer letter. However, these things would make this opportunity good for me. 

So, if you’re offering a 200-base salary, then maybe I want 250 or a signing bonus of 10,000, and I want a 20,000-signing bonus. And will you provide relocation assistance if I move into a new city? These are all things that employees should do at this stage. And even though a professional gives an offer letter. It doesn’t mean that’s the end of it. And then, even further, if you come to terms with the offer letter, what will then follow will be an employment agreement. Even if you sign another offer letter unless there’s the language that says this is a binding offer letter. You can change no terms, which you will never see. Once you get the employment agreement, you can still negotiate terms.

Why Is it Important to Understand the Industry Standards?

So, you need to think strategically, alright? I would suggest never signing an employment agreement that you’re unhappy with. Even if you reject the offer letter and decline the employment agreement, it doesn’t mean that the negotiation is over. Suppose the professional is reasonable in what they’re asking for. In that case, I find most employers expect at least some negotiation when they’re bringing in new candidates. I mean, it is the expectation. But once again, if they’re reasonable. Suppose someone is asking for a 200% increase in base salary. In that case, the employer is likely going to, look, you are delusional, and we will move on to a different candidate. So, it helps the professional understand the industry standards in their profession. That way, they can ask for reasonable changes to the contract. There are also many times when you’ll get brief details in the offer letter. 

Then when you see the actual written language in the agreement. It substantially changes what it looked like in the offer letter. Maybe if it just briefly mentions there will be a non-compete. Once you review the employment agreement, it’s a terrible non-compete. Maybe you are expecting a one-year non-compete, and they offer three, or you’re expecting a small geographic radius of 10 miles. They came back with a hundred, or something like that. That can change from “yes, this is a great offer” to “there’s no chance I would ever accept this job.” So, there can be negotiation throughout the process until the professional signs the employment agreement. At that point, those are the terms. It would be best if you made certain before you sign anything that you’re okay with what is in agreement. Then understand there will be obligations after the employment relationship ends.

Can a Physician Negotiate After Signing a Letter of Intent?

Can a physician negotiate after signing a letter of intent? The letter of intent is also known as an offer letter. The normal recruitment process would be close to the end of their residency or fellowship. And then, most people find a job through one of three ways: either word of mouth amongst colleagues or mentors, a physician recruiter can reach out to them. And say here’s a position that might fit your needs. Then initiate the process that way, or the physician can always find job opportunities through job listings on the internet. Once the process has been initiated and the physician is discussing it with the physician recruiter. Such as the terms of the relationship, salary, bonus opportunity, locations, that type of thing. Many employers will then ask the physician to sign the letter of intent.

Basics in an Offer Letter

The letters of intent is just the basic structure of the employment relationship: start date, location, and contract length. Which is known as the term, how both parties can terminate the contract, compensation. So what’s the base salary? Is it RVU production? What are the thresholds? Is it a collection? What’s the net collection percentage? And then, the restrictive covenants, non-solicit, what are the terms of the non-compete? And then usually, the basic benefits, so what do they offer in terms of health, vision, dental, life, disability, retirement? What does the employer pay for continuing medical education, licensing fees, DEA registration, association, and societies?

Just basic things. These are all the things we’re going to provide to you. Now, some letters of intent are more detailed than others. Still, if a physician is okay with the general terms of the offer letter. Then, the employer will say, we need you to sign the offer letter. And then, at that point, we will get the employment agreement drafted, and then they’ll offer the physician the employment agreement. Is the offer letter or letter of intent binding? The answer is no, unless there’s language there that says it is binding. You rarely find a letter of intent stating this is a binding document. For several reasons, it doesn’t make sense for a physician to sign that under any scenario.

When Should a Physician Decline an Employment Agreement?

Basic terms in an offer letter with no context or explanation can change substantially. Once we can see the actual language of the employment agreement. Maybe they will state it in the offer letter. There is a non-compete, but there’s no description of it. Well, perhaps you read the employment agreement, and you’re expecting a one-year non-compete. They say it’s three years, or you’re expecting a 10-mile restriction geographically, but it’s 50. The initial offer letter may look like, okay, a non-compete, well, that’s expected for a physician. But once you read the terms, it goes from being reasonable and okay to be completely unreasonable. In that scenario, although the physician signed the offer letter, they do not need to go through with signing the employment agreement. 

And then, I would also suggest that even though the physician has come to terms with the offer letter. It doesn’t stop them from renegotiating the terms before signing the employment agreement. As I said before, once one reviews the actual language of the contract. It can completely change someone’s perception of a job. I’m willing to make a smaller base salary if the non-compete is not as restrictive when I leave. Or let’s say you have a claims-made malpractice policy and the employer is saying. We will pay for your tail insurance once you go. They might be willing to accept a smaller base because the employer will pay tail insurance. Then when you look, and you get the employment agreement, the language states the employee must cover their tail.

Negotiating the Terms Before the Employment Agreement

Maybe depending upon specialty, that could be a significant amount of money. And then the physician may say, well, I had no idea I had to pay $50,000 tail insurance. Therefore, I want a more extensive base salary to offset that. So, even after the physician signs the letter of intent, they certainly can continue negotiating once they see the actual terms of the employment agreement. Now, a couple of considerations: it’s not bad form to go back and renegotiate terms. However, some employers may get ticked off when the physician agrees to the offer letter terms and then return to renegotiate those terms. It can be off-putting to some employers. However, if the physician frames it in, well, you said that I would have this, and I expected this to be kind of industry-standard, but once I saw the language, it wasn’t.

For instance, there are normally 60 to 90 days without cause termination. This means either party can terminate the agreement for any reason, with a certain amount of notice to the other. So, they’re expecting a 60-day without cause termination notice. And then the employer says, you have to give us a one-year notice. Well, that’s insane! No physician should agree to that. And they absolutely should renegotiate the terms once they see the actual language in the employment agreement. No physician should sign a contract that they’re either unwilling to meet the terms or are significantly unhappy with before starting the job. There will always be push and pull when it comes to a contract. There is no perfect contract. It doesn’t exist. There will be things that the physician has to relent on that maybe they’re unhappy with.

Fair Negotiation

And maybe the employer has to relent as far as compensation goes or have to pay tail insurance. Or any of the things I’ve already discussed. But, if both sides feel relatively bad about the agreement. It usually means it was a fair negotiation. If one side is super happy, it usually means the other side is not. So, don’t sign an offer letter if you’re not happy with the terms. But even if you sign an offer letter that you’re okay with doesn’t mean you can’t renegotiate the terms after the fact. Now,  lose out on an opportunity if you do that. An employer could theoretically pull a job offer. But in that scenario, I don’t think it’s worth moving forward because you don’t want to tick off an employer. It doesn’t make sense.

Physician Negotiating an Offer Letter in an Agreement

Can you reject a letter of intent? The quick answer is yes, you certainly can, and should, if you’re unhappy with the terms of it. Letters of intent, also known as an offer letter, can be provided once negotiations or discussions about a position move forward. Normally, it would work if a potential candidate would find out about a job. Either through a job listing or word of mouth. Or maybe they were reached out through a recruiter. There’s a discussion of the main point of the position. Like the salary, benefits, that type of thing, and location. And once there’s interest on both sides, many employers will offer the letter of intent or the offer letter.

And that is a description of the main points of the employment relationship. In a letter of intent for a job, the contract’s start date, location, and length will be included. This is referred to as the term; perhaps a brief discussion about how both parties can terminate the contract with compensation would be beneficial. So is there a base salary? Are there bonus opportunities? Is it net collections, or commission-based RVUs? It would be a brief description. It would not go into a lengthy four-paragraph discussion of comp. If malpractice insurance is necessary, who pays for that. And then who pays for the tail insurance if that’s necessary? Are there restrictive covenants? The restrictive covenants are typically non-disparagement, non-solicitation, and non-compete, and they may be reviewed briefly as if this is how long they will last.

What should an offer letter include? There will be jobs that just provide an offer letter with no employment agreement to follow. Then there will be other jobs where they will send the offer letter, expect the professional to sign it, essentially agreeing to the terms of the offer letter, and then they’ll provide an employment agreement with the details of the employment relationship.

What is in an Offer letter?

What is normally in an offer letter? An obvious thing, So, compensation, bonus structure, benefits offered if it’s a healthcare position, the malpractice insurance obligations, maybe some language about the restrictive covenants such as non-compete and non-solicitation agreement, how long the contract lasts, and how it can be terminated, but in a very brief, like one sentence “this is what’s going to be” manner.

If you’re okay with what’s listed in the offer letter, most people would sign it, send it back, and then the employer would work on getting an employment agreement together and then send it off to the professional for review. If you sign an offer letter, it doesn’t mean you’re stuck with everything you agreed to if, in a review of the employment agreement, things substantially have changed, meaning the fine print may not look as great as it looked in the offer letter. So, if you’ve signed an offer letter, unless it states it’s somehow binding in some way, which almost none of them ever are, you’re still free to negotiate after you’ve signed the offer letter. Now, the employer may take umbrage with this and say, well, look, you’ve already agreed to these terms. But look, if they say your base comp is 150,000, but when you start reading it, it’s maybe partially based upon production or fully based on production after a certain period, it can change your outlook on the position.

Paying for the Insurance

The same thing goes if they’re paying for your insurance if you’re a healthcare provider. They’re going to pay your underlying premium, but maybe you must pay for tail insurance after the contract ends, which can be a significant expense for some. Now, if you’re in a position where you’re just signing the offer letter, and there’s no contract to follow, I know for most lawyers, almost no lawyer signs an employment agreement. It’s all based on, they send you an offer letter, this is how much you’re going to make, and then that’s it. Then you start the job, and that’s what you’re going off is that offer letter.

Negotiate in Advance

So, you certainly want to negotiate in advance. However, if you have signed the offer letter and you’re still getting an employment agreement, you’re not stuck. You can still negotiate. And then, ultimately, if you decide not to sign the employment agreement, they can’t force you to start work. You just move on. And that’s just how business goes. Once again, the things you want in the offer letter are the things that are important to you. The compensation, the benefits, which are like time off, health, vision, dental, life, and disability, are they going to pay for your licensing dues and fees? That type of thing. How long the contract lasts, how you can get out of it, and how much notice you have to provide. And then the restrictive covenants like the non-compete, non-solicit, non-disparagement, and the terms of that.

If you want to know about the non-compete, the briefest way possible is one year, five miles from your primary practice location, or something like that. And then, the employment agreement will have the actual details of it. You should never sign a non-compete that is extraordinarily brief. It has to be spelled out. It normally would take up at least a page of a contract to get the details correct. So, that’s what should go in an offer letter.

What Happens After You Sign an Offer Letter?

There are two main distinctions. A professional could receive an offer letter, and that’s it. No employment contract follows. It’s just you agree to the terms of the offer letter, and then you start the job. And then, the second way would be the employer asking the potential employee to sign an offer letter, agreeing to basic terms. And then, they’ll incorporate those terms into an employment agreement and offer the employment agreement to the prospective employee. Then that person must decide if they want to sign the employment agreement and move forward with the relationship. 

Let’s first go with if you begin an offer letter with no employment agreement to follow. In that scenario, you’re most likely in an at-will employment relationship. This means that the agreement or the employment relationship may terminate at any time, for any reason. This is with no notice unless specifically stated in the offer letter. For the most part, there wouldn’t be any restrictive covenants that follow when the employment relationship ends. Restrictive covenants could include a non-solicitation agreement and a non-compete. 

Those are the two most common or the two that matter the most for most employees. They provide you with an offer letter that goes through basic things if you negotiate. Such as compensation, benefits, and start date, and that’s about it. I would say most licensed professionals usually would sign employment agreements. Attorneys don’t, for the most part, but almost anyone in healthcare, physicians, nurse practitioners, PAs, vets, chiropractors, and dentists, always sign employment agreements.

Not Required to Take on an Offer You Signed 

Let’s say you’re in another situation where they give you an offer letter, and you agree to the terms. Then they’ll follow up on the employment agreement. Many people ask, alright, what if I’ve signed the offer letter? But when they give me the employment agreement, it doesn’t look great. Do I have to go through with the job? The answer is no. Unless there’s strange language in the offer letter that states it’s binding, which would seldom happen if they follow up with an employment agreement. You can still negotiate terms. 

Let me give you an example. Let’s say the offer letter states there’s a non-compete, but it doesn’t have any details. So, you get the contract and then look in the non-compete, and it’s five years and covers an entire state. Like you will have to move out of the state if you want to continue in your profession. Well, that’s not a reasonable non-compete. But that could make a job that may have looked great at a hundred thousand a year be only worth 200,000 a year. That is if you accept that terrible non-compete. 

Provide Context for Disputing Job Offer

Even if you’ve accepted the terms of the offer letter, it doesn’t mean you have to go through and execute the employment agreement. The employer will probably talk about you agreeing to the terms, and now you’re returning to us. So, it is most effective if you provide some context as to why it looked good initially. Still, after reading the actual details of the employment agreement, it’s not so good.

I think most smart employers can understand that and appreciate that. If you just come back at them and say, no, now I want to double the salary, the bonus, or whatever. Without providing context, I assume the employer will not be pleased with that and may even pull the offer. So, what happens when you sign an offer letter? First, an employment agreement will likely follow, and then you’ll have to determine if you want to go through with that, or they’ll give you the offer letter. It’s an at-will relationship; you can leave at any time, and there likely aren’t any strings attached.

Can Offer Letters be Revoked?

I’m going to talk about a scenario where an employer would say. I need you to sign this offer letter.” Once we have the signed offer letter, we will follow up with an employment agreement. It is not a scenario where they give you an offer letter, and that’s it. There are some industries, I mean, I’m a lawyer. I know in most law firm environments, none of us sign employment contracts. Almost all of us are just at-will employees, and we get an offer letter that goes through the terms, and that’s it. You will have an employment contract in many other industries, especially healthcare and sales. It states how the employment relationship will be handled with compensation, benefits, termination, malpractice insurance, and restrictive covenants. It details the kind of the relationship’s nuts and bolts.

A Rescinded Job Offer is Exceedingly Rare

Today, it’s just when you get an offer letter, and then they follow up on the employment contract. In short, can an offer letter be rescinded? Yes, it can depend on extremely rare occasions. An offer letter would have language that states it’s binding in some way. It is just exceedingly rare. I usually see it only in academia, where they don’t have employment agreements. It’s more like a longer offer letter that refers to a bunch of policies and procedures. Still, in a normal work environment, they will say, alright, let’s come to terms on the basic outline of the employment relationship. 

We’ll both sign the offer letter and follow up with an employment agreement that goes into detail. It gets into the nuts and bolts of, for instance, if they say there’s a non-compete, how long is it? What’s the geographic restriction? How many points does it entail? Is it specific to the profession or the specialty of the professional in the situation? You’re not going to get details like that in the offer letter. 

Let’s give an example. Let’s say you’re in sales, they say, alright, let’s come to terms. You’re good on the comp, on the benefits, on the bonus structure, on the non-compete, and you sign the offer letter. And then, three weeks later, you still haven’t received the employment contract and have not looked for any other positions because of this, relying upon that job. But then the employer states, you know what, we’re not going to be able to go through with it currently. And then they take the offer letter away. Well, they can do that. That’s just an unfortunate part of doing business. 

In the Same Way, You Can Back Out From the Written Job Offer

Think of it from both perspectives. Suppose you signed an offer letter and decide to back out of a better job, moving, family concerns, whatever it is. In that case, you also want the opportunity to get out of that offer letter. And it’s going to go both ways. Either party can already decide to back out of the offer letter, assuming there’s no binding language, which, as I said before, is exceedingly rare. So, yes, an offer letter can be withdrawn. You don’t have to go through with it. You don’t have to offer an employment agreement if you’re the employer. If you’re an employee, it’s bad form to sign an offer letter and decide not to go through with a job. Still, I would never recommend someone sign an employment agreement they’re uncomfortable with. And the terms of an offer letter can look great on the surface.

And then, when you get into the details of the employment agreement, it can change how it looks. It may state the terms of the bonus. You’ll get this much per year. But it may not say, but if you terminate the contract, you won’t get any of the bonus that you earned that year or some.” You know, there are details you can’t find in the offer letter. Once you see them in the employment agreement, they can change the context of the situation. The offer letter can be rescinded but you also don’t have to go through with it. If you’re an employee, it works both ways. And that’s just how the professional arena goes, as far as the offer letter or letter of intent is concerned.

How should a professional write a termination notice?  So, assuming you have a signed employment agreement or independent contractor agreement, both contracts will always include a termination section, which states how you can terminate the agreement.

Ways To Terminate an Agreement

There are usually four ways that you can terminate an agreement. One, if the term ends. So, let’s say you end your contract. There’s no language about automatic renewals, and neither party wants to continue the relationship after one year; it ends. That’s one way the contract can be terminated. Second, by mutual agreement. If both parties agree, you know what? It’s not working out. Let’s move on. That’s an easy way for a contract to be terminated.

The third is for-cause. So, if one party breaches the contract, there’s usually also a cure period. For instance, let’s say you need to be paid the amount they said they would pay you. You give them written notice. You said you would pay me this amount, but you’re not. You’re in breach of contract. Usually, the contract will state how many days they must fix the breach. Then if they don’t cure the violation or the breach, you can terminate the contract immediately.

And then the fourth way and usually most common way is without-cause termination. That means either party can terminate the agreement, at any time, for any reason, for a certain amount of notice to the other party. And that’s where the termination letter comes into play. For most industries, it’s somewhere between 30 to 90 days. Healthcare is a little bit more to accommodate continuity of care. For sales, software, and anything like that, 30 days is the standard. Once you determine how much notice you have to provide your employer, you must figure out what needs to go into the letter.

Write a Simple Termination Letter

If you’re determining the contract without cause, you don’t need a justification for why you’re terminating the contract. Sometimes, people come to me and write down two pages of why they’re terminating the agreement. It doesn’t matter. If you’re going to terminate the agreement without cause, you need to say in your letter, per the agreement, I am giving you 30 days’ notice. I am terminating the contract without cause. My last day of employment will be X date. If you have any questions, let me know. Thank you for the opportunity with this job. That’s all it needs to say. It doesn’t need to have a massive diatribe about all the existing problems or why you’re leaving.

As I said before, short and sweet, I’m terminating the agreement. As per this section, I have to provide 30 days’ notice. So, my last day of employment will be X date. Thank you. And that’s it. The last thing you need to consider is where to send the notice. In the agreement, there will be a notices section at the end stating to whom you must send the message of termination and how. Most contracts will say it has to be in writing. So, if you verbally tell your boss, that’s not enough. It has to be in writing. It has to be sent via either hand delivery or certified mail. More places nowadays will accept email, although most don’t. So, look to the notices section and see whom you have to give the notice termination to, how it has to be delivered, and what needs to go into it.

Giving the Proper Termination Notice

And if you have those three things, the written notice, the appropriate language, sent to the right person via the correct delivery method, then you’ve given proper notice, and you’re good to go once your agreement ends. Now, a couple of considerations. You need to see if your employer can accelerate the termination when you provide notice. If you have a 30-day notice, is there language that says that once you give notice, the employer can accelerate the data termination immediately? And then do they have to pay you for those 30 days? You should refrain from signing a contract that says they can accelerate the data termination and not pay you. That isn’t good. So, if you have a 30-day notice and the employer wants you to go early, they should still pay you for those 30 days.

And then one other consideration is bonuses. The contract often states that if you have a bonus that you have yet to receive, you forfeit the right to get it if you give any notice of termination. Look into the contract’s language and see how the bonuses are paid, how the compensation is calculated if you leave before the end of the quarter or the year, or whatever it is. I’ve had plenty of people who have just given termination on the wrong date and have left much money on the table from bonuses that they have already earned.

Language is critical when it comes to this. Many times, it’ll state when it’s paid out. I have a professional who’s earned a bonus, given notice, and expects to get paid, but their data termination is before the date that the bonus would generally be paid out. They don’t get the bonus. Anyway, that’s how you write a notice of termination letter.

How Do I Write a Notice of Termination of a Contract?

How to write a notice of termination of an employment contract. In any employment contract, there will be a section that deals with how to terminate the agreement. Parties can terminate an agreement in one of four ways. 

4 Ways Contract Termination Can Be Done

One, if it’s a fixed term, so if the contract only lasts for a period, let’s say it’s two years. If there’s no renewal language, the two years end and it’s not renewed. The contract is over with. You don’t need to notice a termination letter for that. The second way of doing it is through mutual agreement. Both parties, for whatever reason, decide it’s fine. They both want to move on. They can do it at any point without any notice to the other party.

Another way is through breach of contract. And in that scenario, suppose one party feels the other party is in breach of the contract. There will be language stating they have to provide written notice of what the wrongdoing and the breach were. And then usually, there would be a cure period. That means a period for the party breaching the agreement to fix it. Normally, that would be somewhere between 15 to 30 days. If they fix whatever the issue is during that period, then the other party can’t terminate it immediately. 

The last way is where the provider will write the notice of termination letter if it’s without-cause. In almost any contract, there’ll be without-cause termination. This means either party can terminate the agreement at any time with a certain amount of notice to the other. Normally, somewhere between 30 to 90 days, depending upon the industry. 

What’s in a Contract Termination Letter?

Now, in the notice of termination letter. I find most professionals want to put a lengthy treatise on their grievances with the employer. Plus all the reasons why they’re going to terminate the agreement and all the problems they’ve had. That’s a bad idea. All the professionals should put in the termination notice as per the agreement, “I’m terminating the contract via without-cause termination. I’m required to give you 60 days’ notice. My last day of work should be X date. I appreciate the opportunity. That’s it, sign it off.”

One thing to think about in the contract, it will state it should have something called notice or notices. It’ll state precisely how to provide notice in this scenario. So, if you’re required to provide written notice through a termination letter, that will state how you can give that notice to the employer. 

Termination Letter Do’s and Don’ts 

Often, email is not sufficient, certainly not verbally. Fax typically isn’t. Usually, people send via registered certified mail, overnight hand-delivered, or something like that. Then it will list specifically, here is the address you need to send it to. Say a provider or a professional doesn’t follow the notices section. The employer could state, you must stay with us until you give us effective notice. I’ve had a couple of times where a professional came to me and said, well, I just told my boss, so I assumed that was the start of the 30 days. And then they waited until 30 days. They said, hey, you never gave us effective notice, you owe us another 30 days. So, make sure you follow that.

There’s no benefit to airing the grievances. Nothing is going to change. If someone is leaving an organization, then just leave. You’re not there to fix whatever the issues are. And, likely, they’re not going to fix it anyway. If you’re at the point where you want to terminate the employment relationship, keep it short and sweet. I’m giving you notice per the agreement. This is how much notice I’m giving you, this will be my last day of work, appreciate the opportunity. That’s it. That’s all you need to do.

I know the inclination is, no, I want to put all the reasons why. But there’s honestly no benefit to you. Maybe you’ll create some bad blood. Who knows? Down the road, management changes. The job suddenly becomes a great opportunity, it could circle back around. You wouldn’t want to cause friction where it’s just unnecessary. There’s no need to justify your decision to terminate the agreement without-cause. It’s just simply not necessary. So, that’s how you will write a termination letter, short and sweet.

Can You Write an Email Letter to Terminate a Contract?

You probably shouldn’t, and your employment contract probably prohibits it. In any contract, it’s going to state how you can terminate an agreement. It could be for-cause, without-cause, mutual termination, or maybe the initial term ends. But in most cases, I mean most contracts are terminated without-cause termination. In without-cause termination, either party can terminate the contract with a certain amount of notice to the other. Typically, around 30 to 90 days is a standard amount for most employment agreements. Suppose you are an employee, and for whatever reason, you don’t want to work for the employer anymore. In that case, you need to follow those terms written on the without-cause termination notice.

And it always needs to be written. It’s going to state that you must write a letter. And then, it will also state if it’s a 60-day without-cause termination. The employee has to provide it 60 days prior, work it out, and after the 60 days are over with. The employees are free to go once the contract terminates, and the employees are free to move on. To where they want to go after that—considering if there’s a non-compete or a non-solicit. Still, we’re not going to get into that today. 

Check The Section of The Agreement Dealing With Notice Letter 

The most crucial part as far as this goes is it will be called notice or notices. It’s toward the back of the employment agreement initially provided by the company. And this will state who, then how you need to provide notice if there is communication.

An employee could provide in writing a certified letter overnight hand delivery of whatever termination notice you’re going to provide. And that would then be considered effective notice. Very few contracts allow email as an effective notice medium. Let’s say, you wrote an email telling your employer. “I’m giving you without-cause termination notice, and I have 60 days; X will be my last day of work. I appreciate the opportunity.” Well, if the email is not an effective communication medium within that notice section, that’s not considered effective notice. And then, the employer could make you work for another 60 days until you provide effective notice. So, that’s the most important part. You need to look in the notices section and determine if the proper way to terminate the agreement includes email. 

I can tell you if I review a hundred contracts, 98 of them will not include email or fax. And you certainly can’t just verbally tell your employer you’re leaving. It must be in writing. And most often, it has to be sent either by certified mail or hand-delivered. Depending on whether you work for a small practice or a big conglomerate with locations in every state. It’ll be impossible to hand-deliver the notice if you must provide notice to the headquarters that’s halfway across the country. 

Give a Printed Letter 

To be safe for the most part, you need to write a letter. You’ll have to print it out and send it via the certified mail that the employer is using. Usually, it’s one or two. You must send it to the owner if it’s a smaller practice. If it’s a big conglomerate, you have to send it to your boss. Plus the legal apartment of the company as well. If you kind of look through, how much notice do I have to provide? And then how do I have to provide effective notice, you’ll be safe. 

I have a couple of scenarios, and people have called me after the fact. And they’ll say I sent a letter to my employer’s email. I told them I was going to terminate the contract, and they didn’t say anything. I assumed that my contract would end on a specific date. The employer was mad about the employee leaving the company. The employer was ticked off that they were leaving. So, what they did was they just sat on it for 45 days. Then, 15 days before the physician thought he was to leave, they said, you didn’t provide us with effective notice. Email isn’t an effective form of communication to provide notice. You owe us another 60 days until you give us effective notice, meaning a written letter sent via certified mail. 

However, the physician had already lined up another job, he had a start date in mind. Then he had to return to the new employer. He would say, I apologize; I will have to delay my start date by almost two months. That was a tough pill to swallow for the physician. If you follow the terms of the notice section, then you should be okay.

What Should Be in a Termination Agreement Letter?

What needs to go in a termination letter from an employee? If employees decide they no longer want to work for the employer, what to put in that letter? First, we have a few things to discuss regarding terms and termination. The term is the length of the contract, and it should be specified. It could be one year, two years, or three years. Then there’s normally a language that would say it would automatically renew for one year after that. More and more, there are evergreen contracts, which just means there’s no initial term specified. It just says the contract goes on forever until terminated by either party.

What Form Should a Contract Termination Letter Take?

After that, you need to identify how to terminate the contract. There are a couple of ways to terminate an employment contract. If it’s a fixed term, two years, no possibility of renewal, it ends, and that’s it. You don’t even need to send a letter. Then, mutual agreement. This isn’t working out if both parties approach the other. We don’t need to give notice. Let’s move forward. You don’t need a termination letter there. For cause means someone is in breach of contract. The contract will usually require written notice saying, hey, you’re breaching the contract. And then there’ll be what’s called a cure period. It means there’s a period for the employer to fix the breach or the employee. And if able to fix the breach within that period, it’s usually somewhere between 15 to 30 days. The contract reverts and the party couldn’t terminate for cause.

Contract Termination Letter When a Breach Has Occurred

If there was a breach of contract, let’s do this from the employee’s perspective. They would first send a written letter stating you are in breach of contract. And then, if there’s a cure requirement, you have 15 days to fix this breach. If it fails to fix the breach, the employee’s option is to terminate immediately. In that scenario, the employee would send another letter stating he failed to fix the breach. I’m terminating the contract immediately. Thank you. And that’s it. Once again, in the initial letter, you need to state the reasons for the breach of contract. And then, in the second letter, if they failed to fix the breach. Just state, hey, you didn’t fix this. I’m moving forward. 

You don’t need to put a list of grievances or all of the problems with the employer. You just say you breached; and you didn’t fix it. And give the details about the breach and then move on. Now, that’s rare. The most common way to terminate a contract is without-cause. Almost any employment contract has a statement saying. Suppose either party wants to terminate the agreement at any time. In that case, they can do so with a certain amount of notice to the other party. 30 to 90 days, anywhere between, is standard for without-cause termination notice. 

In that scenario, that’s where the termination letter would come into play. Let’s say the professional has a 60-day notice. They write the letter, they say per the agreement. I’m giving you 60 days’ notice. My last day of work will be X date. Thank you for the opportunity. I’m moving on. Once again, this letter is not the time for an airing of grievances or all the problems.

Keep Your Contract Termination Letter Short and Simple

Putting all of that down on paper is no benefit to the employee. It needs to be short and sweet. I’m exercising my right to terminate the agreement without-cause. I’m providing you with this amount of notice as required. My last date of work is this. Thank you for the opportunity. Good luck. That’s it. There are zero benefits to burning bridges to pointing out all the flaws in the employer. I know many employees feel like I just wanted to say my piece. It’s not a good idea for a couple of reasons. At that time, that job may stink because of management, mismanagement, the people you’re working with, the opportunity, whatever.

And if you send some nuclear bomb letter and destroy the relationship, what if something happens down the road? What if the manager changes? What if they move into new territory? Or what if someone buys them out? If you’ve nuked those relationships, that opportunity may be much better. Now, it’s a bad look, and you may have lost out on being able to go back. That’s one reason not to do it. And the second one is that there’s simply no benefit. If you’re moving on, move on. It feels good for the employee to get all that stuff out. But when it’s written, it’s forever. And so, they’re going to have that letter. They’ll probably show it to other employees or management if it’s bad. And it just makes the employee look bad. 

So, keep it short and sweet. Say, this is the contract section, I’m exercising this without-cause termination, last day of work is this. Thank you. Move on. That’s it.

Can an Employee Terminate a Contract at Any Time?

The short answer is probably. However, it’s going to depend upon the language in the contract. There are ways that an employee can terminate an agreement. One, if there’s a fixed term, meaning a one-year, two-year, or three-year contract. And there’s no language that states the employment contract automatically renews. At the end of that fixed term, if neither party wants to sign another arrangement, the contract terminates. Both parties can move on. That’s it. That’s one way on the agreement that can end a contract. Two, through mutual agreement. Maybe it’s not working out, and both parties are like, you know what? Let’s move on. You can mutually agree to terminate the agreement. Three, for the cause. In any employment contract, there will be a section called termination. In that section, it’s going to state how both parties can terminate the agreement.

Is it worth it to take a six-month contract position, or is it better to wait for a full-time position? Let’s talk about the employment status first and then what needs to be in the independent contractor agreement to make that decision.

Types of Employment Relationships

So, there are two types of employment relationships. You’re either an employee or an independent contractor. With this question, we’re talking about people who are doing contract work as independent contractors, and that could be a variety of things. It could be for a specific task, or it could be for a company that needs a little short-term help with something, but you are not an employee, meaning you won’t receive a W2 at the end of the year.

Taxes aren’t taken out of your compensation, and you most likely won’t be getting any benefits. Now, it’s possible you could be a short-term employee, but for this specific question, I’m just going to look at it from the perspective of being an independent contractor. So, before you start any job or contract position, it’s very likely you will have to have signed an independent contractor agreement. And in that agreement, it’s going to state how the contract can be terminated. So, when you’re trying to decide whether it is better to take the short-term assignment or wait for a permanent assignment, you need to see what your termination options are after you start the job. For instance, almost any contract is going to have some way of terminating the agreement with a certain amount of notice to the other party.

Short-term Contract Work Termination Options

Now, when it’s a short-term, six-month assignment, for instance, and it has maybe a 60 or 90-day without-cause notice, well, that needs to be considered. So, even if you were to start, if you give 90 days’ notice, you still have to work there for three months, and then, depending upon whether you got a full-time offer or not from somewhere else, that’s what should go into whether to take the short-term position or not. Are you stuck for those six months? Meaning you cannot get out of the agreement without some for-cause reason, meaning they have violated or breached the agreement in some way. And then you can terminate the contract immediately, and there will be language in there about that as well. But if you start the position and it states it cannot be terminated except for-cause reasons, well, then you’re stuck in that position for six months, no matter what. And if a full-time position becomes available during that time, you’re stuck.

Review Termination Options Before Taking the Contract Job

So, that’s the first thing you need to think about. Am I in it for six months, no matter what, or do I have some options to get out of it? Because if you can get out of it with a certain amount of notice, then there’s really no harm in taking that job. No job is going to say if you can’t start within the next 10 days, it’s gone. I mean, it’s very unlikely, at least for a permanent position. If you are the right person for a job, a company will absolutely be willing to wait 30 days, most likely for you to get out of your contract. Now, if you said not to wait 90 days, well, they might move on. So, if you can negotiate the without-cause termination notice down, then you absolutely need to do that. Now, another consideration is sometimes there’ll be a penalty associated with terminating the contract early.

For instance, if you were given a signing bonus and relocation expenses, most of these are probably remote, so that’s not going to be a part of it. Maybe if they paid for some licensing dues and fees, certifications, whatever, you may have to pay some of those back. So, that’s another consideration. What are my repayment requirements if I terminate the contract early if I get a permanent position offer while I’ve started this contract position? So, in summary, should you take a six-month contract versus waiting for a full-time job? It really depends on how quickly you can get out of the contract after you’ve signed and then what you’re going to have to pay back to the employer or organization that you’re working for as an independent contractor.

What is a Full-Time Contract Position?

What is a full-time contract position? In my mind, if you’re working in a contract position, then you’re an independent contractor, and usually, as an independent contractor, you are brought in to do a specific task for a specific amount of time. I’d say more and more, now that people are working remotely, contract positions are, I guess, more prevalent than they used to be. There are some different categories of being in a contract position. For instance, let’s say I wanted to have a website built and I used Upwork or onlinejobs.ph or something like that to find somebody. It would be a limited scope of what they’re doing for me. It would take a limited amount of time and that would then make them have a contract position that was part-time.

The Difference Between a Full-Time Contract Position and a Regular Employee

Now, if you are a full-time or in a full-time contract position, the only thing that really differentiates you from someone else is they have employees that are paid as W2 employees. At the end of the year, they’ll receive a W2 which shows all the compensation that they received and then all the taxes that were taken out. Whereas if you’re in a full-time contract position, you’re classified as an independent contractor, and then at the end of the year, you’re going to receive a 1099. And as a contractor, no taxes will be taken out of any of the compensation that you received. So, at the end of the year when you file your taxes, you are responsible for paying the state and federal taxes associated with any compensation that you received. Many times, if someone is acting in a contract position or as an independent contractor which is really the same thing effectively, they can’t transition into a full-time permanent position.

Benefits of both Full-Time Contract Position and Regular Position

But in that scenario, it’s extremely likely that you’ll then transition from an independent contractor into an employee, as I said before, where you received the W2. What are the benefits of both? Well, in a contract position, at least if you’re doing part-time work, you can work for whomever you want, whenever you want, and your schedule is completely up to you. Whereas if you’re working in a full-time contract position, you’re going to sign an independent contractor agreement of some sort. And then in that agreement, it’s going to state what the expectations are as far as your time commitment to the organization you’re working with. And so, many of those agreements will state you can’t have outside employment without written approval from the organization you’re working with. The entire point of being an independent contractor is for it to be quick in, quick out, and can work for multiple people at the same time.

Whereas as an employee, especially as a professional, there’s almost always either exclusivity or outside activities provision, which would then prevent the professional from working in multiple locations or for multiple organizations at the same time without written approval from the employer. So, keep that in mind. One of the main differences between being an employee versus a contractor is just that you’re going to have some restrictions based on who you can work for and when you can work. Now, one other consideration as an employee and a contractor, especially as a full-time contract position, is that there very likely will be restrictive covenants in whatever agreement that you signed. Restrictive covenants prohibit the independent contractor from doing certain activities during or after the contract ends. The most common restrictive covenants are non-compete, non-solicit, and non-disparagement. For most people, the non-compete is the most important part.

Non-Competition Clause in an Independent Contractor Agreement

And yes, you can have a non-competition clause in an independent contractor agreement.  There are a few states where non-competes are completely unenforceable. So, I would check with whatever state you’re in that makes certain that you’re not in one of those states. And even if you did sign a non-compete in one of those states, it’s very likely it would be unenforceable. However, most states do have some enforceable non-compete either through their case law or in their administrative code or statutes, or regulations. It’s called different things in different states, so be very careful about how it’s worded. I find that for some of the healthcare professions, it’s much more limited, whereas if you’re in sales it could be very broad, meaning they want to knock you out from the entire state of doing things for similar employers.

What you want to do for any non-compete is get it as specific as possible, meaning the scope of it should be the specific thing that you’re doing for that organization. So, if you are in software sales as an independent contractor, then it needs to say you can’t work in software sales, not any sales. Or if you’re in a full-time contract position doing IT work or doing graphic design or whatever it is, it needs to say specifically what you’re doing for that employer. That way you have some options to do some other things after the contract or agreement ends. So, that’s what it means to be a full-time or in a full-time contract position.

What is a full-time contract position? In my mind, if you’re working in a contract position, then you’re an independent contractor, and usually, as an independent contractor, you are brought in to do a specific task for a specific amount of time. I’d say more and more, now that people are working remotely, contract positions are, I guess, more prevalent than they used to be. There are some different categories of being in a contract position. For instance, let’s say I wanted to have a website built and I used Upwork or onlinejobs.ph or something like that to find somebody. It would be a limited scope of what they’re doing for me. It would take a limited amount of time and that would then make them have a contract position that was part-time.

The Difference Between a Full-Time Contract Position and a Regular Employee

Now, if you are a full-time or in a full-time contract position, the only thing that really differentiates you from someone else is they have employees that are paid as W2 employees. At the end of the year, they’ll receive a W2 which shows all the compensation that they received and then all the taxes that were taken out. Whereas if you’re in a full-time contract position, you’re classified as an independent contractor, and then at the end of the year, you’re going to receive a 1099. And as a contractor, no taxes will be taken out of any of the compensation that you received. So, at the end of the year when you file your taxes, you are responsible for paying the state and federal taxes associated with any compensation that you received. Many times, if someone is acting in a contract position or as an independent contractor which is really the same thing effectively, they can’t transition into a full-time permanent position.

Benefits of both Full-Time Contract Position and Regular Position

But in that scenario, it’s extremely likely that you’ll then transition from an independent contractor into an employee, as I said before, where you received the W2. What are the benefits of both? Well, in a contract position, at least if you’re doing part-time work, you can work for whomever you want, whenever you want, and your schedule is completely up to you. Whereas if you’re working in a full-time contract position, you’re going to sign an independent contractor agreement of some sort. And then in that agreement, it’s going to state what the expectations are as far as your time commitment to the organization you’re working with. And so, many of those agreements will state you can’t have outside employment without written approval from the organization you’re working with. The entire point of being an independent contractor is for it to be quick in, quick out, and can work for multiple people at the same time.

Whereas as an employee, especially as a professional, there’s almost always either exclusivity or outside activities provision, which would then prevent the professional from working in multiple locations or for multiple organizations at the same time without written approval from the employer. So, keep that in mind. One of the main differences between being an employee versus a contractor is just that you’re going to have some restrictions based on who you can work for and when you can work. Now, one other consideration as an employee and a contractor, especially as a full-time contract position, is that there very likely will be restrictive covenants in whatever agreement that you signed. Restrictive covenants prohibit the independent contractor from doing certain activities during or after the contract ends. The most common restrictive covenants are non-compete, non-solicit, and non-disparagement. For most people, the non-compete is the most important part.

Non-Competition Clause in an Independent Contractor Agreement

And yes, you can have a non-competition clause in an independent contractor agreement.  There are a few states where non-competes are completely unenforceable. So, I would check with whatever state you’re in that makes certain that you’re not in one of those states. And even if you did sign a non-compete in one of those states, it’s very likely it would be unenforceable. However, most states do have some enforceable non-compete either through their case law or in their administrative code or statutes, or regulations. It’s called different things in different states, so be very careful about how it’s worded. I find that for some of the healthcare professions, it’s much more limited, whereas if you’re in sales it could be very broad, meaning they want to knock you out from the entire state of doing things for similar employers.

What you want to do for any non-compete is get it as specific as possible, meaning the scope of it should be the specific thing that you’re doing for that organization. So, if you are in software sales as an independent contractor, then it needs to say you can’t work in software sales, not any sales. Or if you’re in a full-time contract position doing IT work or doing graphic design or whatever it is, it needs to say specifically what you’re doing for that employer. That way you have some options to do some other things after the contract or agreement ends. So, that’s what it means to be a full-time or in a full-time contract position.

Independent Contractor Agreements

An independent contractor agreement is a vital part of the modern workplace. For many professionals, including in the healthcare industry, working as an independent contractor can offer several contract benefits, such as having control over your work schedule and enjoying the ability to collaborate with multiple companies. 

While such a contract agreement may seem attractive to most people, it is essential to dive deep into what this independent contractor agreement entails. And how it differs from a traditional employment contract. This way, you’ll get to know what to expect and how to handle yourself during the contract duration. In this blog post, we will discuss:  

• What is an independent contractor agreement
• Is a physician an independent contractor
• Employment contract agreement vs. independent contractor agreement
• What to look out for when signing an independent contractor agreement

What Is an Independent Contractor Agreement? 

An independent contractor agreement is a legal document between the hiring company and an independent contractor. This agreement outlines the terms of the working relationship, including the services, the compensation, and other relevant details.

It is important to note that independent contractors are not employees of the company they are contracting with. Instead, they are self-employed individuals who provide services to that company. This can breed confusion, primarily if you’ve never worked as an independent contractor. You may have questions about what’s fair and reasonable and how to work with what’s provided and what’s not provided in the contract. If this is your case, you should consider consulting an experienced physician contract lawyer to help you review the contract. And guide you on all you need to know before signing the agreement. 

Is a Physician an Independent Contractor? 

A physician can be an independent contractor or an employee depending on the contract agreement they signed when starting their job.  

The vast majority of physicians are employees meaning they signed an employment contract. However, some specialties, such as dermatology and anesthesiology, are more independent contractors.  

Employment Contract Agreement vs Independent Contractor Agreement

As discussed below, there are three significant differences between an employment agreement and an independent contractor agreement.

Work Status 

When you sign an employment contract agreement, you become an employee of the hiring company. However, if you sign an independent contractor agreement, you’re considered a self-employed individual or a freelancer.

Taxes 

If you sign an employment contract agreement, you must complete the w-2 tax forms. This means that taxes will be deducted directly from your salary. While if you sign an independent contractor agreement, you’ll be paid full compensation. However, you’ll be required to complete the 1099 tax forms to pay off your taxes on your own at the end of the year. 

Benefits 

An employment contract offers benefits such as life insurance, health insurance, disability insurance, paid time off, retirement plans, and Continuing Medical Education (CME) reimbursement. In contrast, an independent contractor agreement doesn’t offer any company benefits. However, you may be eligible for a higher salary and compensation factor for relative value units (RVU). 

About to Sign an Independent Contractor Agreement? 

Before signing an independent contractor agreement, you must understand what you agree to. This way, you can know what to expect and be sure the contract agreement is fair to you as it is to the hiring company. The first step is reviewing the contract and negotiating where needed. To make this even much easier for you, you should consider consulting an experienced healthcare attorney who can review and advise accordingly. Attorney Robert Chelle is a professional contract attorney who has helped many healthcare workers review their independent contractor agreements. He can help you too. Feel free to reach out today.

Independent Contractor Relationship

Remember, as an independent contractor. You’re free to work for multiple entities simultaneously, meaning you must be careful not to breach your contract by working with a competitor of your hiring company. If you breach this agreement, you may face the consequences, such as being sued by the hiring entity.