10 red flags in physician employment contracts

Employment agreement takes effect upon signing and locks you into the agreement for a significant period

If you are bound to the term of an employment agreement upon signing, you may need to comply with the agreement even though you have not started working for the employer.

For example, suppose a physician signs an employment agreement on January 1, with a start date of July 1. The employment agreement takes effect when it is signed. The agreement states that the physician can only voluntarily exit the agreement after working one full contract year. On March 1, the physician receives a better job offer and wants to accept it. But technically, any termination of the contract before July of the following year would be a breach of the employment agreement, and the employer could subject the physician to a claim for damages, even though they haven’t started working yet.

How to navigate this issue:

• Discuss with your lawyer when the employment agreement will take effect.

Let the employer know as soon as possible if you do not intend to start employment at all, or on the agreed-upon start date.

The contract only states the minimum number of patient hours per week and allocates no time for administrative work or other tasks

Many contracts state the physician must devote a minimum of 40 hours to patient care, not taking into account administrative tasks (e.g., electronic health record [EHR] entry, prior authorizations, reviewing test results, referrals, etc.)

A physician with a role 100% dedicated to patient care should understand how many hours in the workweek will be devoted to direct patient care rather than administrative tasks.

How to navigate this issue:

• Make sure the agreement contains enough information so that duties and schedules are clear.
• Be clear and open about your schedule expectations.
• Confirm the agreement aligns with conversations you’ve had with the employer about your schedule.

In an independent practice, the contract expires when you become eligible for equity, even if no equity is offered

In instances in which future equity in a practice is an option, physician employment agreements often expire immediately when the ownership opportunity arises.

If an offer is not made or is not promptly made, this approach can leave you without a written contract before signing new ownership documents. Even worse, if no equity offer is made, this can leave you without a contract or a job.

How to navigate this issue:

• Request that the employment agreement be written to continue until it is terminated by one of the parties according to the terms of the contract, or it is replaced with a new agreement or partnership documents.
• Alternatively, ask that the offer of employment be made for a fixed period before expiration, which allows you time to negotiate the buy-in documents and sign them before the contract expires.

The contract allows the employer to accelerate your termination date when you give notice

Employers sometimes write contracts that include a termination without cause provision. It specifies that a physician providing the proper notice required under the agreement in good faith can be summarily terminated and no longer receive any compensation.

For an example of how a termination without cause provision might be worded, download the AAFP member-exclusive resource A Family Physician Guide to Employment Contracts.

How to navigate this issue:

• Focus on your exit strategy when reviewing a new contract so you aren’t surprised when an agreement is terminated.
• Discuss revising the contract so you continue to receive compensation and benefits for the entire notice period.

Subjective reasons for termination, like reputation or opinions about conduct

An ideal agreement should require your employer to give you written notice of cause for termination (e.g., failing to satisfy requirements of the agreement, failing to complete medical records in a timely manner, failing to comply with a policy) and an opportunity to fix alleged breaches or deficiencies within a reasonable period of time.

How to navigate this issue:

• Inquire whether such a subjective termination provision requires the employer to act reasonably and in good faith when terminating a physician.
• Download A Family Physician Guide to Employment Contracts and know the questions you should be able to answer about termination before signing any agreement.

Broad geographic regions in noncompete provisions

Many noncompete provisions try to restrict a physician from competing with any employer locations, or anywhere a physician ever practiced while employed. The reasonableness of the geographic provision will depend on the location of the practice, specialty and from how far away the practice attracts patients.

An example of an increasingly common and overly broad noncompete provision is one that would limit you from working for a new employer who has a location within a certain radius of your previous employer’s sites, even if you currently practice outside the noncompete area. Such wording could prevent you from working for an employer in another state because it has a clinic within the designated radius of the previous employer’s location(s).

How to navigate this issue:

• Look for clear and specific contract language so you understand your obligations.
• Clearly understand the exact location to which the geographic noncompete is tied.
• If the location is described as where the physician spends a certain percentage of “time or effort” at the time of termination, it is essential to understand how time and effort will be measured. From the physician’s perspective, choose as high a percentage as possible so that the noncompete covers fewer locations.

Noncompete provisions that interfere with a patient’s right to select their physician

Nonsolicitation provisions restrict you for a period of time from soliciting your former employer’s patients, employees, or independent contractors who may have worked for the employer.

However, some contracts may also prevent you from treating any patient you saw while employed by a practice, even if you did not solicit the patient.

How to navigate this issue:

• Work with a lawyer who can help you vigorously challenge these types of provisions because they interfere with a patient’s right to select their physician.

Required compliance with written materials that are not provided with the contract

It is not unusual for an employment agreement to refer to outside documents. Outside documents expressly incorporated by reference are generally considered terms of the contract.

Examples of outside documents include rules and regulations, policies, handbooks, ethical guidelines, bylaws and similar materials. An employment agreement will often reference payer contracts; contracts between the employer, hospital and other organization(s); and similar materials.

How to navigate this issue:

• Obtain all copies of these outside documents. They may provide valuable information about working for the employer.

Verbal promises are made but are not included in the contract

It is not unusual for an employer to reject making changes in writing and instead provide verbal reassurances. This process can be frustrating. If faced with this situation, think about your concerns and whether they are deal breakers.

Signing an employment agreement with the belief that a term will be changed in the future or won’t be enforced can be a mistake. You typically can't rely on verbal promises, emails, or side letters.

How to navigate this issue:

• If you decide to sign the agreement with verbal reassurances only, be sure you understand the termination provisions in the contract and know what your exit strategy will be if these verbal, non-binding promises are broken.