Everything You Need to Know About Medical Employment Contracts
Before starting a new job as a physician, it is important to sign an employment contract. Such a contract not only states your duties but it sets clear guidelines on what you and your employer should expect from each other.
While you and your employer can communicate the grounds of operation through emails, phone calls, or texts, a written contract will legally protect and cover your rights in situations such as contract termination or unfair employee benefits coverage, among others.
In this article, we’ll cover:
- What is a medical employment contract?
- Who needs a medical employment contract?
- What to look out for in a medical employment contract
- How to navigate an employment contract
- What are medical employment contract pros
What Is a Medical Employment Contract?
A medical employment contract is a written agreement between you (the physician) and your employer. The contract entails what is expected from you during (at times before and after) your working time with your employer. It also details what you should look forward to from your employer.
The contract highlights things such as the type of medicine being practiced, the number of working hours, your availability, your duties, compensation, arbitration clauses and benefits.
It is important to read and understand your medical employment contract before signing it. You should never dismiss something in the contract and think “that won’t be enforced,” as that may be a good recipe for disappointment later on. It is advisable to have an employment contract lawyer or a practice management consultant familiar with medicine employment law review your contract prior to agreeing to it.
Who Needs a Medical Employment Contract?
Anyone interacting directly with patients to provide medical assistance needs to sign a medical employment contract prior to starting the job. These can be new employees, full-time employees, part-time employees, independent contractors, or Locum tenens physicians. Therefore, the following healthcare workers, among others, should sign medical employment contracts:
- Nurse Practitioners
- Licensed Practical Nurses
- Physician Assistants
- Nurse Anesthetists (CRNAs)
- Registered Nurses
- Nursing students
- J-1 Physicians
What to Look Out For in a Medical Employment Contract?
Medical employment agreements can seem to be complex and difficult to understand due to some legal terminologies and considerations. However, it is important to understand the contract no matter what. This is especially true if your hiring contractor has stayed for a long period without hiring.
For example, there’s a physician– let’s call her Dr. Lisa- who learned the hard way after accepting her first job through a “handshake agreement.” “I was focused on the medicine I would be practicing, and I didn’t know the right questions to ask. I worked without a contract for 7 months. I didn’t get paid until I’d been there 6 weeks, and I never had any health benefits,” she said.
Some of the crucial things you should look out for include:
Term and Termination
You need to take note of the start and end date to know the term length of the contract. Also, check any conditions that need to be satisfied before the start date. This can be things such as obtaining licensure in the practicing state.
An employment contract can be terminated or voided if conditions are not met by the starting date. It can also be terminated due to malpractice, incomplete restriction, and issues tied down to compensation, among other things. Be sure to read and understand every reason your employer may have for the termination of the contract.
Take note of when the contract will expire. Sometimes the expiration date can be forgotten or left out. Such cases can cause a lot of pressure due to job security. Therefore, if the contract doesn’t renew automatically before the end of the term, remember to renew it manually before the expiration date.
Non-competes hinder you from practicing within a specified geographical area after your contract has been terminated. Usually, the radius can be within 2-50 miles, depending on your place of employment (rural or urban area).
It is always important to negotiate a larger radius, say 50 to 100 miles, especially if you’ll be working in a densely populated area.
What Are the Pros of Medical Employment Contracts
Apart from a clear established relationship between the employer and an employee, an employment contract creates other benefits such as:
Clear Compensation Model
Your employment contract should detail your total compensation. This includes your basic salary and any incentives and bonuses. The model can either be salary with a minimum wage guarantee, salary plus bonuses, or equal Shares Compensation.
Once you sign the contract, you will be eligible for several employee benefits. These benefits may include the following:
- Paid time off
- Health insurance coverage
- Life insurance
- Medical malpractice insurance
- Liability insurance
- Continuing Medical Education reimbursement
- Retirement plans
In case you need to relocate before starting your new job and your employer has agreed to help you move, you should include those expenses in your employment agreement. According to Meritt Hawkins, healthcare practitioners offered a relocation bonus were offered an average of $10,533.
How to Navigate an Employment Contract
Here are 5 summarized steps to help you fully understand and navigate your medical employment contract:
- Understand common contract terms such as Indemnification, return of records, Intellectual Property, etc.
- Comprehend the provided compensation model
- Discern fair benefits and compensation packages
- Understand the legal consequences that come with signing a contract
- Understand working conditions, liability, and restrictive agreements in your contract
- Determine if there are elements of an independent contractor agreement
Note that you don’t have to accept everything that is offered, nor should you negotiate every part of the contract. Study the contract and decide which points are most important to you, be firm on those points and a bit flexible on the less critical points.
Starting a new job with a favorable contract can place you in a suitable work environment where your job security, finances, and practice are well protected. The first step to ensure this happens is understanding the contract fully and negotiating where needed. To make the process much more convenient for you, you should consider having an experienced and knowledgeable attorney by your side. If you need help with a physician contract review, feel free to contact Chelle Law for assistance. He will help you every step of the way!
What are the consequences of breaking an employment contract? The first issue is what is considered breaking a contract? I think some people think just exercising their right to terminate the agreement is breaking the contract. I don’t think of it that way. When I think of breaking a contract, meaning, you don’t give proper notice, you just simply leave the job without following the terms of the agreement. In that scenario, what are the potential consequences? Let’s say professionals at a job and it’s not working out for whatever reason. In almost any employment contract, there’s going to be a section that kind of discusses the ways the contract can be terminated. And then within that section, there’ll be what’s called without cause termination. Without cause termination simply means either party can terminate the agreement for any reason at any time with a certain amount of notice to the other party, normally somewhere between 30 to 90 days.
Let’s just say the professional walks in on Monday and says, I’m leaving tomorrow, but they had a 60-day without cause termination notice requirement. Well, if that does happen, the employer could then potentially go after, and when I say go after, I mean legally go after them, sue them for breach of contract. And when you sue somebody for breach of contract, there can be several damages involved. There could be lost profits for what they would’ve expected that employee to generate during that 60-day period, they could also go after the replacement value. If they had to find short-term replacement that was very expensive, they could go after the employee for that. There could be damages for recruitment fees in trying to find that employee’s replacement. They could maybe go after them to get back a signing bonus, relocation assistance, licensing fees, and credentialing if they’re a healthcare provider.
So, yes, if you do break a contract, meaning, you just simply walk out and don’t fulfill the terms of the agreement, there could be several things that the professional could be liable for. Now, a lot of times when I’m having a consultation with somebody who is unhappy, they just say, well, these are all the things the employer is not doing right. They’re not paying me my bonus in time, or they’re making me work more than that in the contract or I’m having to take twice as many calls as they said I would. Okay, well, just because they’re doing it or they’re breaking the contract, doesn’t mean you can just leave and then cite that as a reason. If you believe the employer is in breach of contract, you need to provide them with written notice that states you are in breach of contract for these reasons.
And then normally, there’d be some language that states you can cure the breach, usually somewhere between 15 to 30 days. And if the employer does fix whatever the problem was, then the employee cannot terminate the contract for cause. If you can terminate it for cause, usually, it can be immediate, meaning, you give the employer written notice that they’re in breach of contract and if the employer does nothing, then it would be the option of the employee to terminate it immediately. That is simply different than the employee just breaking the contract. You must go through it to protect yourself under the terms of the agreement. And even if the employer is not fulfilling their terms, you still must give them notice. You still must wait for the cure period. Then if they fix whatever the problem was, you still can’t just break the contract and jump immediately to a new position.
To protect yourself, read the contract, see how the contract can be terminated either for cause or without cause, and follow the requirements. If you must give 60 days’ notice to terminate the agreement without cause, you must give 60 days’ notice or you can potentially open yourself up for a lawsuit in damages. The last thing, there will be a section in the contract that states how effective notice can be given. What I mean by that is it will state to give proper notice. You must send either certified mail, hand delivery, a written letter to the address of the business or the attorney of the business or whatever. If you don’t give effective notice, meaning, you don’t follow that notice section, it would not be considered a proper termination. And in that scenario, the employer can simply say, well, you owe us another 60 days until you give us effective notice or whatever.
So, follow the termination section, and follow the notice requirement. In that way, you can avoid having to either pay anything back to the employer or must pay damages for lost profits, recruitment fees, and the things I went over at the beginning of the video.