What are some of the common "first contract pitfalls" that one should be watching out for when signing for one's first job out of residency? Thanks!
Great question. While every contract is different, there are certain terms that often show up in physician employment contracts and that can have a lasting impact on the physician even after the employment relationship ends. Non-compete clauses are one area that often raise concern. Generally a non-compete provision will limit the geographic area in which the physician can practice after leaving the group or hospital. They may also limit the physician's ability to work in a competing medical group if that group provides services in the same hospital or health system. Further, in situations where the group has multiple office locations, the non-compete may attempt to limit the physician's ability to work within a certain radius of any of their locations. Depending on the nature of the area, whether urban, suburban or rural, a broad non-compete clause can have a significant impact on the physician's ability to practice elsewhere in the same locality or region. For this reason, it is important to understand the proposed scope of any non-compete provisions and where it is determined to be unnecessarily broad, make efforts to negotiate more reasonable terms to narrow the scope. The scope of reasonableness for non-compete clauses varies from state to state and is generally governed by state law. Likewise, if the non-compete clause is effective in both "for cause" and "without cause" terminations, it is often helpful to try to limit it's application to situations where either the employer terminates "for cause" or the employee terminates the relationship (i.e., leaves to pursue another opportunity), but not situations where the employer terminates the relationship "without cause".
Contract terms addressing professional liability insurance should also be reviewed with scrutiny. The physician will want to know the coverage limits of the policy the group or hospital agrees to maintain, as well as the deductible. It is also important to understand whether the policy is a "claims made" or "occurrence" policy, as the type of policy will have an effect on the physician's need for "nose" coverage as well as future "tail" coverage. An issue that often comes up in physician employment contracts is whether the physician or group will be responsible for obtaining tail coverage after the employment relationship ends. Obtaining tail coverage can be a considerable cost and if the obligation falls on the physician it is helpful to understand that up front before the contract is signed.
Indemnification provisions are another areas that should give physicians pause. These contract terms may ask the physician to indemnify or hold the group or hospital harmless for any claims or losses resulting from the physician's acts or omissions while employed. "To indemnify" generally means that the physician would agree to insure the group or hospital's risk. As a result, indemnification provisions carry the potential for considerable financial liability on the part of the physician and, to the extent possible, efforts should be made to remove these types of contract terms during negotiations.
These are just a few of the common pitfalls in physician employment contracts that can (and often do) come up when starting one's first job out of residency. Signing bonus payback provisions, partnership buy-in provisions, the specificity of terms addressing hours, location and call schedule, and subjective "for cause" termination terms are other areas that can result in future issues for the physician. It is extremely important for the physician to both fully understand the terms included in a proposed employment contract as well as considers whether it is possible to negotiate to have restrictive or overly-burdensome terms removed or narrowed in scope.
