By Christopher E. Brown, J.D., The Health Law Firm, and George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law
This blog is the ninth in a series intended to provide a review of the basics of contracting for physicians and health professionals, primarily by discussing employment agreements. We will highlight many of the common provisions found in employment contracts, along with many of the mistakes and pitfalls that we see in our day-to-day practice.
By the end of the series it is our hope that physicians, nurse practitioners and other health professionals will understand the common language and terms found in employment contracts for professionals so they can recognize mistakes commonly made when negotiating them. We hope to help make both employers and employees more knowledgeable about employment contracts so they can avoid potential problem areas and legal entanglements.
Our comments here are meant to provide general rules we have learned from our experience. However, please remember, every situation is different and there are exceptions to every rule.
Tip 22 - Be Detailed and Specific on What Income Will Go to Employer and Any That May Be Kept by the Employee.
This tip is an expansion on Tip 16 - Determine How Outside Employment and Compensation is Handled. Typical physician employment agreements will contain statements such as: "The physician agrees to devote his/her complete time and attention to the business of the employer." Or they may contain a clause stating: "All income derived from professional services delivered by the employee shall belong to the employer," or something similar. This can be problematic if the employee:
A. Moonlights, for example by pulling shifts at a hospital's emergency department on the weekends;
B. Has a separate medical practice or business on the side such as providing diagnostic studies, testing, counseling, etc.;
C. Works part time somewhere else, such as at a walk-in or urgent care clinic;
D. Consults as a practice management consultant, a risk management consultant, etc.;
E. Serves as a medical expert reviewing patient records for attorneys and providing expert opinions;
F. Serves as medical director of nursing homes, or home health agencies;
G. Invents new medical inventions or technologies on his/her own time;
H. Teaches; or
I. Lectures or writes and receives honoraria.
I have been involved in several court cases where the physician took employment with a large healthcare system and had an oral understanding, never in writing or included in his/her written contract, that the employee could continue a part-time medical practice and keep all of the income from it. This only became a problem (a big problem) years later when the employer found out about it and decided to sue the employee. The employer wanted all of the extra income that the employee had made and had not turned over to the employer.
Make sure that if there are any activities that you will participate in on your own time, including other part-time employment or moonlighting, this is specifically spelled out in the contract and the party who is entitled to receive the income from it is also specified. Furthermore, in the case of government employees such as military or Veterans Administration (VA) physicians, these types of activities may be illegal without advance written permission from the government.
Tip 23 - Make Sure You Receive a Copy of the Contract Back Signed and Dated by the Other Side.
As we have written before, one of the biggest problems we see again and again is when a dispute arises, the party coming to us (usually the employee) does not have a copy of the contract that is signed or dated by the other party (usually the employer).
Can you imagine buying or selling a house without getting a contract signed by each party? Can you imagine buying a car without getting a copy of the contract signed by the other party? Then how can you enter into a contract covering years of time for something as important as a profession without obtaining a signed and dated copy from the other side?
Think of employment contracts as prenuptial agreements. As long as everyone does what he or she is supposed to do and things work out okay, the contract is not needed or referred to in most cases. It is only if things start going wrong, for example, if the employee does not work the hours he is supposed to, if the employer does not pay the bonuses it agreed to pay, that the contract gets pulled out for possible enforcement.
In litigation in which I have been involved over physician employment agreements, I have had the following defenses raised by employers when sued for breach of contract by an employee:
A. The employer never agreed with the changes the employee wanted in the contract, so the employer never signed it.
B. The employer and employee were involved in negotiations on a possible contract but could never reach an agreement, so the employee has no contract and is merely an "at will" employee;
C. There was never a signed contract so the employment agreement is unenforceable under the applicable statute of fraud.
D. There was never a signed contract so the employment agreement is illegal and unenforceable under the Stark Act and the Anti-Kickback Statute.
If you are the employer, never let the employee start working before you have a copy of the contract back signed and dated by the employee. If you are the employee, never start working, not even a day, before you have a copy of the contract back signed and dated by the employer.
When we review contracts we often add an addendum or amendment to the contract that states:
"This agreement shall not be valid or enforceable unless Employee actually receives a copy signed and dated by the employer on or before (date) and employee shall not be expected to begin work until then."
Adhering to these types of requirements keeps everyone honest.
Past and Future Blogs on Employment Contracting.
To review our previous blogs on physician contracting tips: click here for part one, click here for part two, here for part three, here for part four, click here for part five, click here for part six, click here for part seven and here for part eight.
In our future blogs, we will continue to provide tips on various issues to watch for in health care employment contracts.
Contact a Health Care Attorney Experienced in Negotiating and Evaluating Physician and Health Professional’s Business Transactions.
At the Health Law Firm we provide legal services for all health care providers and professionals. This includes physicians, nurses, dentists, psychologists, psychiatrists, mental health counselors, durable medical equipment suppliers (DME), medical students and interns, hospitals, ambulatory surgical centers, pain management clinics, nursing homes, and any other health care provider.
The services we provide include reviewing and negotiating contracts, preparing contracts, helping employers and employees enforce contracts, advice on setting aside or voiding contracts, litigation of contracts (in start or federal court), business transactions, professional license defense, opinion letters, representation in investigations, fair hearing defense, representation in peer review and clinical privileges hearings, litigation of restrictive covenant (covenants not to compete), Medicare and Medicaid audits, commercial litigation, and administrative hearings.
To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.
As a physician, do you have any questions about contracts? Tell us your mistakes or triumphs in negotiating your contract below.
About the Authors: Christopher E. Brown, J.D., is an attorney with The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.
George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.
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The Health Law Firm" is a registered fictitious business name of George F. Indest III, P.A. - The Health Law Firm, a Florida professional service corporation, since 1999.
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