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This guide provides information about physician employment contracts by defining common terms, offering advice about specific provisions, and providing key steps to follow before signing a contract.

SUPPLEMENT SPONSOR: AMERICAN ACADEMY OF FAMILY PHYSICIANS

Fam Pract Manag. 2021;28(5):17-20

INTRODUCTION

Physician employment contracts and agreements can seem complex and daunting. Some legal considerations and issues are difficult to understand, but physicians need to consider them before signing a contract. All agreements between physicians and employers should be included in the written contract between the parties, rather than relying on verbal promises, emails, or letters. A thorough review of a contract is essential and should be done with an attorney and financial advisor with physician employment contract experience.

DEFINITIONS

Term and Termination: A valid contract has a date it starts and a date it terminates. A physician employment contract should identify when employment begins and any conditions that must first be satisfied, such as receiving licensure in the practicing state(s) and obtaining medical staff privileges. Contracts can often be terminated or voided if conditions are not met by the designated start date, so it’s ideal to account for potential delays. Once an employment agreement takes effect, it can usually be terminated in several ways. The termination method is significant since enforcement of non-compete restrictions, malpractice tail-policy obligations, and compensation payments can be tied to how termination occurs.

Expiration: Some employment agreements simply expire on a fixed date. Often, it is the intent that the parties will renegotiate or enter into a new agreement upon expiration. However, expiration dates are often forgotten or missed, leaving a physician with no enforceable agreement and little job security. Therefore, it is advisable for an agreement to automatically renew and remain in place until specifically terminated based on its terms or replaced with a new contract signed by all involved parties. If the contract does not automatically renew, physicians should start searching for new employment before the expiration of their current contract to ensure job security.

Automatic Termination: Grounds for automatic termination typically include death, total disability, or an event, such as loss of license, prescriptive authority, or medical staff privileges, or a similar occurrence that prevents a physician from performing their job.

Termination for Cause: Termination for cause provisions can cover a wide variety of events, such as committing a felony or not maintaining board certification. Most termination for cause provisions are within the discretion of the employer to enforce. Physicians need to be cautious of termination for cause provisions that are subjective, such as those related to the employer’s reputation or general reference to the physician’s professionalism or personal habits. Ideally, subjective provisions are subject to a good faith and reasonable standard on the employer’s part. Most physician employment contracts also contain a catchall provision that allows each party to terminate the agreement for cause if the other party has breached the agreement and does not rectify the breach after written notice.

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