Only an attorney can operate on your employment agreement

When they’d first entered their medical practice, some of my clients had asked an instructor or mentor to review their prospective employment agreement for them. Although these people may have been excellent physicians or teachers, they weren’t acting in the best interests of their charges. When it comes to your livelihood, it’s important to have an attorney, especially one who’s experienced in health law and has drafted hundreds of these kinds of contracts, representing you.

The American Medical Association recognizes the importance of having an attorney involved to protect your rights. The AMA has developed principles advising physicians to retain attorneys to examine their employment contract. Going further, it would be even more prudent for a physician to retain a health law attorney. Health law attorneys understand how healthcare regulations impact the contractual offer and won’t waste time or antagonize your potential employer by asking for changes to the document that conflicts with government regulations.

A health law attorney reviews the contract to ensure the document reflects the understanding you’ve made with the other party. The attorney should be willing to point out potential pitfalls or problem areas while advising the physician on strategies to reduce potential liability. The attorney should make certain every blank in the document is filled in, and every Exhibit, Schedule, or Addendum is attached to the document before you sign it. Finally, in the unlikely event the attorney misses something or makes a mistake during the review, the attorney’s malpractice insurance should provide a remedy for the physician client. Unfortunately, with a review by a well-meaning instructor or mentor, you’re left holding the bag should either have mistakenly interpreted the terms of your contract.

When seeking an attorney for this kind of representation on the Internet, look for someone with a substantive track record of drafting and reviewing these types of contracts. Another thing you might want to consider is whether the attorney offers the contract review for a fixed fee. Fixed fee arrangements provide you with the peace of mind that the work won’t exceed your budget.

When it comes to joining a medical practice, it pays to be prudent. Hire a health law attorney to help you start out on the right foot.

Jack Caynon is principal, Caynon Health Law Consulting.

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  • guest

    This is good advice as far as it goes, but it might be better to include some examples of abusive clauses that are being incorporated into physician employment contracts these days, in order to provide docs with a better sense of the things that can happen if they don’t watch their backs during the contract negotiation process.

    Most physicians are socialized to have a sense that they are “above it all” when it comes to matters regarding employment and compensation because, after all, “we are not in it for the money.” This attitude serves us very poorly in an environment where our compensation is coming not from our patients, but from corporate entities in whose interest it is to treat us as poorly as possible.

    • Dr. Drake Ramoray

      Agreed. Some of the things I have heard from other docs is expansive non-compete clauses as sign on bonuses (sometimes covering several counties) and “sign on bonuses” tied to production. (Ie if you don’t make enough money you lose your guaranteed salary and or a sign on bonus with the job.

      Dont expect an attorney to gve free advice though. Only doctors are supposed to do that without being compensated.

      • guest

        One contract issue I personally experienced was being presented with a renewal contract that upon close reading committed me to significantly more time on call. It also included a new clause that would have allowed the hospital to fine me if I terminated my employment with less than three months notice. The fine would have been equal to the amount of salary that I would have been paid for the notice period in question. When I questioned this clause, I was told that “it’s all about continuity of care for the patients.” Pretty funny since I am a hospitalist and my patients at the time had an average length of stay of 7 days.

        • Jack Caynon

          I would have questioned that ‘fine clause,’ too. Essentially, it’s a liquidated damages clause that’s designed to force you to provide them with the required notice before you actually leave and go to the new employer. In practice, though, I find most hospitals tell you to leave when you provide notice and will pay the three months up front because they don’t want to keep a physician around who’s basically out the door.

          Your experience, though, reinforces the maxim that you need to know what’s in your contract and having an attorney review it to catch items that may have changed from your previous contract is a prudent course of action.

  • Suzi Q 38

    An acquaintance of mine is a lawyer. This is her second career. In her first career she was a dentist. She mostly handles contracts for dentists and dental partnerships who no longer want to remain partners. She said that she didn’t like having her own practice and realized that poor contracts or partnerships could be costly. She has a very lucrative career.
    She lamented that “Contracts and partnerships are a whole lot easier to get into them than get out of them, kind of like some marriages.”
    If it is important, it may be prudent to get a lawyer.

  • Jack Caynon

    You’re right, Joe. Fair market value shifts due to a variety of circumstances. And it’s never a good idea to accept a contract without carefully reading it. You can’t avoid enforcement of the contract’s terms if you say, “Well, even though I signed the contract, I didn’t know that clause I didn’t want was in the document!” Courts always take a dim view of a claim along those lines.

  • ninguem

    Hey Jack, what’s your take on restrictive covenants or “noncompetes” in the physician employment contracts?

    Thanks for posting. Physicians are notorious for eating their young.

    For all the things we like to say about lawyers, when it comes to petty, childish, nasty, vindictive behavior toward fellow professionals, I swear there is nothing worse than physicians.

    Many a young doctor’s life has been ruined by employment practices that would be considered unethical between attorneys.

  • ninguem

    Funny you should mention those two states.

    I had one practice in Massachusetts try to impose a noncompete in my contract, knowing full well the law was in effect, and already tested in court. They claimed the lawyer told them to put it in anyway. How do you trust a practice that does that?

    Oregon, I know of two communities that really did suffer for lack of physicians, when the bigger party (established doctor, hospital, in the two different settings), tried to enforce a noncompete. The targeted doctor left, and in both cases there were patients finding themselves driving 60 miles to find another doctor.

    So, you have parties that were so busy they could not accommodate more patients, yet still they imposed a noncompete on the new doc.

    Both cases were in the newspaper.

    Lawyeres don’t allow them amongst themselves, except in retirement buyouts I guess. I’ve yet to see a State Bar that allows them.

    • Jack Caynon

      I think it would be difficult to trust a practice that knew full well what the law was and decided to put the bogus clause in the contract any way.

      And, as the Oregon cases you mentioned shows, you really aren’t benefiting the patients by imposing a restraint of trade like that, particularly if their is a community need for more physician services.

      • ninguem

        Both those Oregon cases. I’m guessing those noncompetes could well have been voided in court.

        BUT……you know the reality of course. The cost of litigating the case. The targeted docs will spend a fortune litigating the case. In the end, all they will get is the right to practice in East Jerkwater USA.

        So they leave. I’m guessing the Massachusetts practice had the same thing in mind. I wouldn’t know how much it would cost to litigate a clause that is clearly null and void by statute, but I guess it is still not cheap.

        In your state. What would the Bar do to you, if you imposed a physician-style restrictive covenant in a contract for a new lawyer associate?

        To my understanding, that is the unethical practice of law.

        If that’s correct, I often wonder if we should have a similar regulation in our medical associations.

        The community had difficulty accessing physicians when the doctors left. In both those little towns, losing even one physician is a big deal.

        The Bar associations prohibit noncompetes in LEGAL employment contracts, and usually their rationale includes the argument that it would compromise the public’s ability to access lawyers.

        And here’s two examples, in the local news media, of cases where the PHYSICIAN noncompetes compromised the community’s ability to access PHYSICIANS.

        • Jack Caynon

          You’re right about the Bar associations. They prohibit noncompetes in Legal employment agreements. Attempting to put one in an agreement may subject the firm to sanctions by the Bar. So lawyers would shy away from doing it.

          As for the Massachusetts noncompete example you’ve raised, it wouldn’t really be that bad for the physician who doesn’t want to be subjected to it. If the practice tried to apply the clause, the court would simply throw it out and probably subject the practice to paying for the physician’s court costs. So, in my view, I would never tell a practice to leave a clearly void as to public policy clause like that in the contract because it doesn’t provide them any protection whatsoever as well as being unenforceable.

          • ninguem

            So what’s your take on how the courts are looking at these noncompetes? You feel they are going to disappear, why?

            I mean, I think that’s great, but why are the courts suddenly looking at them more closely?

          • Jack Caynon

            I think the courts look at them as remnants of the “master/servant” employment relationships of the nineteenth century that were more pertinent when say a master silversmith taught his traits and skills to an apprentice and the master wanted to protect his market from someone who could duplicate his wares.

            However, with companies moving away from the paternal approach the “master/servant” relationship fostered to a free market “at-will” type of relationship (I pay you to work but I can get rid of you if the economy tanks and you agree to work for me but if someone offers you more money, you can leave whenever you want), restrictive covenants and noncompetes seem like relics of an age gone by.

            Now, courts seem to prefer to use them to protect a company’s proprietary information (a client list or a product formula) from being taken by a former employee to a competitor. But to say someone can’t earn a living simply because they’ve decided to work for you competitor, or worse, you terminated them and they attempt to gain new employment close to where they currently live, doesn’t seem fair to the judges. So courts will try hard to restrict them or void them. If a covenant says you can’t work for a competitor within a 35 mile radius of your former employer, it typically wouldn’t pass muster with most courts because the distance is too great; moreover, it would be virtually impossible for a noncompete to survive if it said you couldn’t work anywhere in the state.

            That said, many states have started to move away from enforcing them. I have a consultant friend of mine who told me when he was an HR VP, he tried to enforce three noncompetes in Massachusetts. All three attempts were shot down by the courts. So he basically stopped putting them in employment contracts because they’ve become so disfavored.

          • ninguem

            What “proprietary information” does a hospital or medical practice actually have?

            I mean, I hear that term constantly in medical noncompetes.

            The doctor who joins a practice Board-certified in medicine, surgery, whatever. The hospital didn’t teach that doctor medicine, the residency did.

            “Secret” or “proprietary” treatments in medicine are generally regarded as unethical.

            In fact, there have been cases where a training program did try to apply a noncompete to its trainees. The idea was, the program needed a sufficient number of sick people to treat, to give the resident or fellow an adequate learning experience. If that trainee graduated and stayed in the community, that doctor would get patients formerly headed for that training program, diluting the experience of future trainees.

            I mean, the training program actually had a point. Still, organized medicine jumped all over the training program for doing that, and they withdrew that noncompete.

            So, a hospital that really does teach the doctor…..not exactly “proprietary” secrets, but still…….they can’t impose a noncompete, but when that folly-trained and Boazrd-Certified doctor joins a private practice, then the noncompete is OK.

            I never could see that.

          • Jack Caynon

            Proprietary information generally means confidential material or intellectual property developed by the employer for its business. So if the employer paid someone to provide it with a consulting report to improve how the ICU works, that would be proprietary information. McDonalds secret sauce on the Big Mac would also be proprietary, meaning an employee couldn’t just take the formula for the sauce and sell or give it to a McDonalds’ competitor.

            A physician’s or attorney’s individual skills would not be proprietary information and shouldn’t be the subject of a noncompete.

  • Jack Caynon

    Another clause a physician should be wary of in a contract between the physician and a hospital is a mutual indemnification clause or hold harmless clause. These kinds of clauses come into play if a patient sues you for a medical malpractice case and alleges vicarious liability against the hospital where you’re working. If you agree to indemnify the hospital and the jury decides the hospital is liable, you may be on the hook to pay the judgment rendered against the hospital as well as its attorney fees and court costs.

    Additionally, you would most certainly want to avoid being on the hook for such a result because it’s unlikely you’d find any medical malpractice insurance to cover your indemnification of the hospital’s liability.

    In my experience, most of these clauses are the result of an attorney who generally uses mutual indemnity clauses in contracts between two large corporations that can afford the mutual nature of these clauses and didn’t realize the extent of the risk that clause places on the physician. However, to avoid potential disaster, be on your guard if one of these clauses pops up in a contract being offered to you.

    • ninguem

      The first practice I had…….there was no contract.

      I showed up for work. I got paid what they said I would be paid.

      I got the benefits they said I would get.

      Hey, ultimately I left, the place had their problems……..but there was never a contract dispute. I can never say I was lied to.

      When I think about it, I **have** been in an employment relationship where I feel I was lied to, and I had a big multi-page contract.

      • Jack Caynon

        Well, one of the greatest business relationships in sports, between Mark McCormack, the attorney who became one of the great sports agents, and Arnold Palmer, the living legend of golf, was formed without a contract. Mr. Palmer has said, “[McCormack] asked for a contract. I said, ‘We don’t need a contract, We’ll just shake hands, and you’ve got a client.’”

        Business relationships built on a basis of trust and good will always have a better chance of working out in the long run than those built on suspicion and ill intent even if supposedly ironclad contracts are involved. However, if the players change in the relationship, say the CEO who signed your contract retires and a new person who wasn’t even with the company takes the former CEO’s place, certain verbal understandings you made with the former may not be maintained by the latter without a written contract in place.

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