Commonly Misunderstood Clauses in Physician Employment Contracts

Physician employment contracts can be more complex than they initially seem. They often contain numerous clauses, many of which can significantly impact a physician with respect to their compensation and future career. It is crucial for physicians to thoroughly review and fully understand all contract provisions before signing. Misinterpreting these clauses can lead to unintended consequences, such as financial penalties, restricted employment opportunities, or prolonged legal disputes. Physician employment contract attorneys have identified some of these clauses as the most confusing:

Call Coverage and Work Hours

Clauses related to call coverage and work hours can significantly impact a physician’s work-life balance, job satisfaction, and overall well-being. Employers may impose extensive on-call requirements without additional compensation, leading to increased stress, burnout, and potential conflicts over workload distribution. Physicians should carefully review several key aspects of call coverage clauses:

• Call Coverage: Assess whether call duties are distributed equitably among all physicians or if certain individuals are disproportionately assigned more shifts. Unequal call assignments can lead to tension among colleagues and undermine morale.
• Compensation for On-Call Duty: Determine whether on-call shifts are compensated separately or included in the base salary. Some contracts may bundle call duty into a flat salary rate, potentially reducing overall earnings for extensive on-call responsibilities. Negotiate for clear terms that outline separate compensation for additional hours worked.
• Frequency of On-Call Duty: How often the physician is expected to be on call and the duration of each shift. Is the call schedule reasonable, or are the hours excessive? Clarifying the frequency can prevent unexpected demands that interfere with personal time and rest.

Dispute Resolution 

Dispute resolution clauses outline how contractual disputes will be handled. Many physician contracts include mandatory arbitration clauses, which require disputes to be resolved through arbitration rather than litigation. However, arbitration can be costly and may limit the physician’s ability to appeal unfavorable decisions.

Before agreeing to arbitration, physicians should consider:

• Arbitration Costs: Arbitration can be costly, and the contract should clearly state which party is responsible for covering fees, including the arbitrator’s fees, administrative costs, and legal expenses. Some agreements require the physician to bear a disproportionate share of the costs, which can deter them from pursuing valid claims. 
• Location of Arbitration: The arbitration venue can significantly impact the process. If the contract specifies the employer’s preferred location, such as the city where the employer’s headquarters is located, it may place the physician at a logistical disadvantage, increasing travel costs and potentially influencing the neutrality of the proceeding. 
• Selection of Arbitrator: The method of selecting an arbitrator is crucial, as the arbitrator’s background and experience can significantly influence the outcome. Ideally, both parties should have an equal say in choosing a neutral arbitrator with relevant experience in healthcare law. 

Non-Compete Clauses

Non-compete clauses, a restrictive covenant, are intended to prevent physicians from practicing within a specified geographic area or time frame after leaving the employer. While non-compete agreements are designed to protect the employer’s business interests, they can significantly restrict a physician’s future employment opportunities. Physicians might misunderstand the extent of these restrictions. A non-compete clause may prevent a physician from practicing in a particular specialty or within a certain number of miles from the current practice. Additionally, some agreements may apply even if the physician is terminated without cause.

Physicians should negotiate for reasonable restrictions and seek clarification on what constitutes “competition” to avoid unintentional violations. It is also essential to look closely at the following aspects of non-compete clauses:

Duration: The duration specifies how long the restrictive covenant remains in effect after the physician’s employment ends. This period can vary widely, ranging from several months to several years. Employers often set lengthy durations to prevent former employees from immediately competing with their practice or soliciting patients. However, excessively long restrictions can severely limit a physician’s ability to secure new employment or establish a new practice. Physicians should carefully review the duration to ensure it is reasonable and not overly restrictive, given the nature of the specialty and geographic market.

Geographic Scope: The geographic scope defines the specific area within which the physician is prohibited from practicing after leaving the employer. This restriction is typically expressed in terms of a radius or designated regions. Employers could set broad geographic boundaries to limit competition. These overly expansive restrictions can severely impact a physician’s ability to find new employment, especially in highly specialized fields or rural areas with fewer practice opportunities.

Scope of Practice: The scope of practice in a restrictive covenant specifies the type of medical practice or specialty in which the physician is prohibited from engaging after leaving the employer. This provision can be particularly significant for physicians with multiple areas of expertise or those who provide both clinical and non-clinical services.

Termination Clauses

Termination clauses outline the circumstances under which the employment relationship can be ended and the procedures both parties must follow. These clauses are often more complex than they initially appear. Physicians should pay close attention to three key aspects of termination clauses: 

Termination Without Cause:

Termination without cause provisions allow the employer to end the contract without providing a specific reason. Physicians should consider negotiating for reciprocal termination rights to maintain flexibility, ensuring they have the same ability to exit the contract as the employer. This provision can also serve as an exit strategy if a more favorable opportunity arises or if working conditions become untenable.

Termination for Cause:

Termination for cause provisions outline specific grounds for immediate dismissal without prior notice, including malpractice, license suspension or revocation, breach of contract, criminal conduct, or substance abuse. While these are common justifications, some contracts can use vague language. Physicians should request that the contract be as specific as possible.

Cure Period

A cure period provides a designated time frame for a physician to resolve issues that could otherwise result in termination for cause, offering an opportunity to correct performance deficiencies or policy violations. It is crucial to clarify the length of the cure period and specify the corrective actions required to avoid termination. Additionally, the contract should clearly define what constitutes a satisfactory resolution and how that resolution will be documented to prevent future disputes.

Contact a Physician Employment Contract Attorney

To avoid unintended consequences, physicians should not rush through contract review or assume that the employer’s terms are non-negotiable. Consulting with an experienced healthcare contract attorney can help identify potentially problematic clauses, clarify ambiguous language, and negotiate more favorable terms of a physician employment agreement. Contact our office today.