Is a letter of intent for 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? If it has without cause termination, what’s the length of notice needed. Indeed, it will have compensation details like base salary, productivity bonuses, and commission percentage.
Maybe a brief description of the benefits. And then if there’s a non-compete involved. If it’s a healthcare contract, maybe some details about the malpractice insurance. Kind of quick bullet points of, alright, this is what we expect the employment relationship will 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. Once an agreement is reached, 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?
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 state, oh, two years and 10 miles from your primary practice location, or in sales, from your sales territory, something like that. And then, when you investigate the agreement. It may be much more prohibitive because you can’t not only work in your specialty, but you can’t work at all 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 in this period within a 10 miles 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. The 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 the offer letter has a specific language. A language stating a binding document in some way is not binding upon the professional.
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 It Yet 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.
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 most offer letters, there will be the contract’s start date, location, and 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, or 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.
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