So you are in your last year of residency or fellowship. You have a bad case of senioritis, for about the fifth time in your career, except that there is now, finally, light at the end of the tunnel….your first job that isn’t a form of indentured servitude. You pick one or more cities that you would like to live in, interview with a few potential employers, and have your heart set on a favorite. You have a second interview, maybe look at some houses in town, and request a contract. Looking through the contract, you realize that 99% of it says “blah blah blah”, and you skip around to look at all of the parts that start with “$”. You think about hiring an attorney to help you, but you’ve only heard bad things about attorneys and some of your mentors and colleagues have complained that they paid their attorney $3,000 to get all of about 10 words changed that will likely never matter.
The purpose of this post is to help you look at an employment contract from a big picture perspective. In some future posts I will go into more detail. In almost any negotiation, leverage is the key. If you have three offers in the same town, and you are willing to go to whichever employer gives you the best contract, then you will likely have quite a bit of leverage. If you have only one offer, you have already moved to the new town, and your prospective employer knows that you are determined to work for it, then you likely have very little leverage. Oftentimes, these scenarios dictate how many changes to the contract you can make. Sometimes, however, leverage doesn’t play out the way it should. I’ve seen some small employers with little leverage that are completely unwilling to change their contract, even if the change would benefit both parties. I’ve seen huge employers that initially state that they use the same contract for everyone but ultimately agree to some significant concessions to get the deal done. Academic, large hospital, small private practice, and all points in between, it is important to understand how much leverage you have just as it is important to realize that sometimes that idea of leverage is thrown out the window because an employer refuses to budge and is willing for you to walk away or because an employer really wants to make its physicians happy and is therefore willing to bend over backwards to make things work.
An attorney should review your entire contract in detail. Sometimes there are inconsistent provisions that need to be addressed. Other times, there are provisions that the attorney has never seen before that create complicated situations. Generally, however, there are some key considerations that exist in almost every contract, and you should focus your attention on those sections as well.
- Who pays for malpractice insurance? Is the policy limit reasonable? Is the policy claims-made or occurrence based? Finally, who pays for the tail at the end of employment? While all are important, the tail might be most important because that can cost many tens of thousands of dollars depending on your specialty.
- Is there a non-competition provision, and if so, how does its duration and breadth (in terms of geography) affect your ability to get a job after termination of this one? In some cases, it may be a deal-killer to have a wide-ranging non-compete if you are returning to your hometown and want to be able to remain there no matter what.
- What is the compensation structure? Is it a flat salary, salary plus bonus, wRVU based, revenue less expense based, or something else? Does your salary increase each year? Can it decrease? Are you eligible for bonuses and how predictable, and under your control, is the total compensation package? Are you subject to patient quality metrics (don’t get me or Christy started on this topic).
- Are you prohibited from engaging in “outside activities”? Can you moonlight, be an expert witness, or guest lecturer? Who gets the money from those services? How broad is the definition of “outside activities”?
- How clear are the employer’s expectations in terms of your work hours, call schedule, dedicated research, administrative, teaching time, etc.? For example, you really don’t want your contract to state that you have to work a minimum of forty hours clinical time per week. That language could mean that you may be asked to work sixty hours or more per week, and it also means that the “minimum” of forty hours doesn’t include charting and other administrative duties.
- How much vacation and CME time do you get each year? Do you receive it over time throughout the year, or is it all available at once? Does it include holidays? Does it carry over if unused and/or have any cash value?
- Are your dues, memberships, periodicals, mileage and cell phone expenses reimbursed? What about board preparation courses and tests, DEA, licensing and other fees? What about travel, lodging and meals at CME courses? Do you have a maximum reimbursement, or will be reimbursed for all reasonable expenses?
- How can you and the employer each terminate the contract? Are some of the sections regarding how the employer can terminate you so vague that they can get rid of you at any time? Can either party (most importantly you) terminate the contract upon 60, 90, or 120 days’ notice?
This is by no means an all-inclusive list, and each of these topics are worthy of their own blog post, but they serve as great examples of why you need an attorney involved who has negotiated many of these agreements.
Having discussed leverage and some of the parts of the contract that you should consider, the next step is how should you negotiate the contract? I have a strongly preferred method that I have used probably more than 95% of the time in the hundred-plus physician employment agreements that I have negotiated. I am not going to reveal it now, but I will make the following two suggestions that form a small part of the strategy: First, you should get an attorney involved before you attempt to negotiate the contract yourself; and second, you should ask for what you want, as the worst the prospective employer can say is “no”.
Finally, I have already mentioned that you want to use an attorney that has negotiated many of these contracts before. Admittedly, it is hard to screen attorneys, so physician referrals and your comfort level in a free consultation with the attorney are important. Aside from those three considerations, get a flat fee quote, or an estimated fee range, from the attorney you want to hire. If you only have one contract, and the estimated fee is $2,500 or more (I recently heard a minimum fee of $4,000 quoted), then you should have some concerns, even though it is possible that protracted and complicated negotiations could result in that high of a fee. A more practical range for a simple contract may be around $1,000-$1,500 for an experienced attorney, understanding that if your attorney helps you pit multiple employers against each other, negotiates a second contract after the first one falls through, or helps navigate you through an employment agreement and a hospital income guaranty, then the final fee could very well end up over $2,500.
Christy and I have set up this blog so that we can help physicians and other medical professionals. We want to create a community of physicians who share their experiences and help each other navigate all the complexities of their lives, professional, legal, financial and otherwise. Christy is a board-certified maternal fetal medicine physician as well as the mother of our three wonderful (at times) kids. She has worked in academics and private practice, and she is far more entertaining than me, so hopefully she will post and comment heavily on this blog. I am an attorney and registered investment adviser and have helped hundreds of physicians over the years in employment, real estate, business, tax, estate planning, financial planning and investment matters, among others. I am dedicated to helping physicians make good, informed decisions in the legal and financial worlds so that they can focus on their jobs and their families with confidence that their advisor is looking out for their best interest. You can find out more about us here. Please feel free to reach out to us directly with any questions, or comment on this post. We will read all comments.