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July 1, 2019

Contract “Gotcha’s” Every Physician Needs to Know: Part 1

This is the first part of our series of doctor employment “gotcha’s” every physician needs to know. Read on to protect yourself from shifty termination clauses.

No matter how far along you are in your medical career, transitions inevitably come with contracts to navigate. These employment contracts are written by your employer’s lawyer. The contracts are designed to protect their best interests above all else.
Do I have hidden clauses in my Contracts?

We are running a three-part series for you, the physician, to get better acquainted with some of the “gotcha’s” in your contract that could come back to bite you down the road.

Here, in part one, we are going to talk about termination clauses and what you need to look out for. From non-competition agreements to insurance concerns, there are some important things to consider before you sign.

Read on for an overview of termination clauses and what they can mean for you. Please note: none of the information in this article is intended to take the place of a lawyer’s advice.
Expect and plan for change.

While it would often be nice to start working at a particular hospital or medical practice and build a lifelong career there, that is actually pretty far from the norm. Up to 70% of new physicians end up changing jobs within the first two years.

When taking a new position, the process of eventually leaving that position may not be on your mind. However, you are doing yourself a huge disservice if you neglect to address that process as a physician. Termination can be difficult and expensive, no matter who initiates it.
What types of termination clauses should you look out for?

Some of the topics that frequently come up in termination clauses are:

Tail insurance coverage
Reimbursement of recruitment fees
Non-compete agreements
How much notice is required upon leaving the practice

Tail insurance coverage.

Tail insurance coverage is basically an extension of your medical malpractice insurance. Often, your medical malpractice insurance ends upon termination of employment at a particular practice or hospital. But, even after you’ve left and the policy has ended, a patient could file a claim against you, leaving you unprotected.

Tail coverage protects both you and the hospital/practice should a claim come up after your employment there has ended.

Who should pay for this coverage when you change jobs?

It is best to have this question clearly answered in your employment contract. It might be that you are fully responsible, your employer is fully responsible, or even a 50/50 split.

Some contracts leave this question open to interpretation, deeming that whomever’s actions initiated the termination be responsible. When this happens, it can be harder to “prove” whose fault a termination was, as there are two sides (and two lawyers!) to every story.
Recruitment reimbursement.

Medical providers actually spend a significant amount of money to recruit physicians to their practice. If things don’t work out, the contract may entitle them to be paid back some or all of it. The recruiting companies themselves often seek reimbursement of fees (from the employer) if their recruit does not work out. Your employer very well may try to pass this expense along to you.

The cost of recruitment can begin as high as $30,000-$60,000 per physician. When you include housing and moving expenses, start-up and equipment expenses, insurance, sign-on bonuses, etc, that amount can easily rise to $100,000 or more.

Obviously, this could add up to a huge price to pay for changing jobs. Consulting a lawyer before signing or terminating a contract with a recruitment clause is a very good idea.

There is currently a shortage of physicians in the United States, and it’s projected to worsen. Considering this, it should come as no surprise that medical practices want to retain employees.
Non-competition agreements.

Common in many fields, non-competition agreements are designed to prevent you from going into competition with your employer (potentially armed with their trade secrets and client base information) should you cease to work for them. This can, in the medical field, extend to your not being allowed access to patient records, or able to recruit any employees or patients from your previous company to your new one.

Non-competition agreements for physicians will typically give a radius in miles in which you may not seek employment in medicine for a set amount of time.

While there are some instances and some states in which non-competition agreements are rendered unenforceable (or mostly so), these can be a tricky legal issue to navigate. Even in states where a non-competition agreement is not enforced, the non-solicitation portion (i.e. “stealing” of employees or patients) very well may be.
Written notice to leave.

In most industries, two weeks notice is considered satisfactory when leaving an employer. For physicians, the amount of notice required can vary widely. But unless you have messed up in a really big way, don’t expect to be out in two weeks.

There will usually be a termination clause governing how much exit notice is required. Employment contracts for physicians typically run for at least a year or two. If a physician wants to leave or will be terminated prior to that contract running its course, at least 30 – 90 days notice is typical.
Termination “at-will” vs. “with cause”.

Keep in mind that some aspects of termination clauses may be based on whether or not your termination was “at-will” (for no particular reason) or “with cause” (for a valid reason – on either side).

If you are terminated before the end of your employment contract for a valid reason (loss of license, willful misconduct, loss of hospital privileges, etc.), then your employer is more likely to seek reimbursement for recruitment and relief from paying for tail coverage. This may also apply if you elect to leave “at-will” before the contract is up. If you are terminated “with cause” you may be released from employment immediately, instead of waiting 60 days (or whatever your contract mandates).
The best way to protect yourself.

Seek the advice of a lawyer who specializes in physician contracts before you sign one as well as before terminating one.

Contract terms can often be negotiated, and physician employment contracts can be tricky to navigate (especially when you majored in medicine, not law!). A good lawyer can help you find the “gotcha’s” listed above as well as anything else in there that could work against you.

Stay tuned to learn about more contract “gotcha’s” to look out for in parts two and three of this series.

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