Guest Contributor, Darren Green, Esq.
Congratulations – Your education will soon be behind you, and an enticing job offer at a private medical practice awaits. Although you’ve worked through all of the material terms of employment with your new employer, to your great dismay an e-mail arrives from the practice’s HR department to which is attached a 40-page employment agreement. Sure it may be tempting to simply execute the lengthy document and start your new life, however this is one agreement which merits a good read and evaluation before signing on the dotted line. While the potential pitfalls are many in these types of agreements, here are 5 material issues each and every physician should ensure are adequately addressed in his or her employment agreement before approving it.
1. Term. It’s fairly common during the courtship stage for employers to suggest 2 or 3 year terms to physicians, however what does this really mean? The corresponding employment agreements often include references to such employment terms, but in the same provision the employer often retains the right to terminate the physician at any time for any or no reason. If the agreement is terminable by either party at any time, the relationship is something closer to “at will” rather than for a set period of time. If you are expecting a term and making life decisions based on your new employer honoring that term, your employment agreement should include a severance payment of some sort in the event the practice elects to terminate your employment without “cause” prior to the expiration of the stated term. A severance or separation payment not only provides a disincentive to early termination without cause, but also provides you with a cushion in the event you find yourself prematurely unemployed through no fault of your own.
2. Partnership. If you’re expecting to become a partner in your new practice, it’s always a good idea to at least lay the groundwork regarding this process in your employment agreement. If your new practice has suggested a 3-year partnership track, get that in writing. If you’ve discussed percentage ownership, buy-in requirements or any other material aspect of your anticipated partnership, why not include language in your employment agreement to ensure that both parties are pointed in the same direction? And while you’re at it, you may want to investigate the possibility of your new employer financing your buy-in to the practice by way of a low interest loan – these happy occurrences can, at least in the short term, cost an awful lot of money.
3. Moving Expenses. Physicians tend to be a mobile sort, which leads to rather expensive moves in connection with new jobs. Most private practices will agree to reimburse physicians for at least a portion of moving expenses, which begs the question – what in fact constitutes a moving expense? Here are a few categories you may want to include in your agreement to ensure you don’t end up with unreimbursed bills: (i) expenses incurred in selling your current home; (ii) moving expenses (e.g. movers, boxes, tape, etc.); (iii) insurance; (iv) house hunting expenses in your new locale; (v) closing costs on your new home; (vi) incidental expenses up to a predetermined amount; and (vii) rent if you are unable to find a home to purchase prior to starting your new job. Beyond those expenses, it may also be worthwhile to push for language requiring your new employer to pay expenses you incur in moving back to your former location if you are terminated without cause within 1 year of your start date (this ties in nicely with a severance payment concept addressed above – if you’re willing to make the sacrifices associated with moving your life to a new location, your new employer should be willing to do the same).
4. Tail Coverage – This is a simple one. You should make sure your employer is responsible for purchasing “tail” malpractice coverage following termination of your employment. At a minimum, this should be the case in situations where you are terminated by the practice without “cause”.
5. Outside Activities – If you plan to lecture, write, teach or do any similar thing outside of your primary employment with your new employer, you should make sure your employment agreement allows for this. In addition, if you plan to retain all fees paid to you in connection with such activities, your employment agreement should reflect this as well. Finally, if your employer requires that you turn over all compensation from these outside activities to the practice, to the extent you are willing to accede to this request you should ensure that these activities are covered under the employer’s insurance policies. They can’t have it both ways.
Darren M. Green, J.D. has over 14 years experience representing a wide range of clients on employment, corporate, technology, venture capital and other transactional matters. He is an Adjunct Professor at Northwestern University School of Law and a member of MD Law Services. Mr. Green received his BA from the University of Pennsylvania and his J.D. from the U.C.L.A. School of Law.
