The Right Approach to Obtain a Good Physician Employment Agreement

Physician Employment AgreementThe right approach to signing a good physician employment agreement begins by not seeking a perfect contract. As is true with many things, maximizing is counterproductive in the process of reviewing and negotiating favorable terms in a physician employment agreement. There is no perfect contract. While advantage and care for details is certainly very important for any contract, obsessing for perfection may effectuate a bad outcome, which can range from causing the employer a sour taste to retraction of a job offer. The better objective is to obtain a good contract – one that actually gets signed, reasonably protects long-term interests, and fosters a good start to a sound working relationship. So, how do you do that?

  1. Realistically assess bargaining position

The first step to obtaining a good physician employment contract is to measure the opportunity. Ask yourself: “How much do I want this job?” “How will this employment advance my career?” “Will I fit in? “Will I be paid fairly?” “What other options do I have?” “How will I transition out of this employment?”

Before reviewing contract terms and language proposed by the hospital or medical practice employer, a physician should evaluate these and similar elements of the circumstances to grade how important the opportunity is to him. Then, in similar fashion, measure the opportunity for the employer. Ask: “How much do they want me?” “What other options do they have?” “Can they easily hire someone else who is right for this particular job?” But put ego aside, of course. A physician should critically and realistically assess what he brings to the table for the employer. The point of this step of the process is to properly gauge bargaining position, so that you will know how hard you can safely push for particular terms or language in the written employment agreement.

If this subjective assessment indicates uniformity is very important to the hospital and its form physician employment agreement is generally a “take-it-or-leave-it” deal for all physicians, the employer will likely be less amenable to proposed changes. This reality would tend to favor subtle or more restrained efforts to negotiate for improved terms or language. If only one job offer is pending, an even more subdued approach may be in order.  On the other hand, if the physician has three offers pending and any one of them would be a good opportunity, a more proactive approach in seeking particular contract terms and language might be beneficial. Realistically assessing negotiating position is essential before scrutinizing a proposed employment agreement with a highlighter in hand. Ultimately, the physician’s gut-call assessment of the leverage equation based on his overall circumstances and experience in dealing with the employer’s representatives will be the best way to decide how hard to push.

  1. Define expectations

What do you want an employment agreement to provide? Create and carefully consider your own “wish list” of terms that regard the elements of the job, including, for example:

  • Location
  • Start date
  • Term
  • Duties
  • Autonomy/oversight
  • Hours/call schedule
  • Salary
  • Benefits
  • Ownership track

Once you have completed that list, overlay your expectations with the particulars of the proposed contract to identify discrepancies between your needs and the employer’s form agreement:

  • What hours are required?
  • At what location(s) are you required to work?
  • What marketing, medical education, promotion, and/or administrative duties and services are required?
  • What are the specific “on-call” provisions and compensation details for such responsibilities?
  • Does the proposed contract require you to consult with other physicians requesting provisional services of the employer?

Once you have identified the proposed contract’s terms that are inconsistent with your wish list or goals, then, using your assessment from Step 1 above, determine what modifications to propose.

  1. Read carefully

Of course, everyone reads contracts carefully, right? Not so. When presented with lengthy, single-spaced, verbose form employment contracts (as most are), physicians tend to assume “this is standard” or “a form,” such that the document is perceived either “ok” just as is or, in any event, written in stone. This type of thinking creates a tendency to gloss over language. That is a big mistake – every time.

Provisions in virtually every “form” physician employment agreement will have potentially large, sometimes problematic, consequences for the physician down the road. The way to identify the problems starts with a slow and careful review of every word. Every provision of the contract should be understood before it is signed. Written contracts are binding and carry significant, long-term ramifications for you and your family. If you do not understand a contract provision or phrase or the mechanics of how it functions in conjunction with other contract provisions (e.g., a bonus formula is applied; how a termination provision operates; what triggers a non-compete agreement), get assistance. “Can they do this?” and “Is this legal?” are questions posed to me many times in assisting physicians with review of employment agreements. The answer is always the same: “Yes, if you sign it.” So, read carefully to be sure you understand your contractual commitment.

  1. Negotiate Judiciously

There are two parts to this tip. First, do negotiate. Do not assume a particular term or language cannot be modified. Even with a so-called “form” contract prepared by a hospital system’s legal counsel, or the involvement of hospital business people that seemed wedded to uniformity in physician contracts for their administrative ease, most employers anticipate that serious minded medical professionals will need to change terms in a proposed contract. So, begin with the assumption that if a term or language to convey is unacceptable for good reason, a reasonable proposal to change it will be, at least, considered by the employer.

The second part, perhaps the more important part, is the qualification “judiciously.” The steps to a good contract obviously fail if no agreement is reached. An offer of employment can usually be retracted. If you are perceived as too aggressive or uptight, rather than smart and reasonable, your language proposals are less likely to be accepted, you may make a bad impression with your new employer, or, worse, the employment offer could be retracted altogether.

So, how do you negotiate “judiciously”?  With your realistic assessment of your own bargaining position in mind, make a list of the terms in the proposed contract that you initially believe need to be changed. Then ask yourself as to each one: Does this really matter?

A term really matters if you foresee a meaningful possibility it will negatively affect your long-term best interests. If so, you will need to address it with the employer. If not, then do not worry about it, even if the term or language seems imperfect to you.

A word about lawyers: be careful using them. While competent legal counsel can be indispensable to your efforts to obtain a good physician employment agreement that will properly protect your interest, it is very important that your lawyer balance your desire to get the job and get a good contact. A lawyer obsessed with obtaining the perfect contract for you, too zealous in presenting proposed changes, or otherwise off-putting to the employer can be a fly in the ointment in reaching a deal. Therefore, it is very important for you to effectively communicate to your legal counsel what your goals and priorities are.

  1. All proposed changes should be unassailably reasonable, mutually fair, and reasonably precise

When you determine you need to propose a modified term, or change language to express a term, the reasonableness of your suggested change must invite the employer’s acceptance, or the employer will be unreasonable.   For example, if it is unreasonable for your non-compete agreement to cover the geographic area within a ten mile radius of every practice location of a large practice or hospital system in a densely populated city, it may be reasonable to ask that the prohibited territory of non-compete be limited to the address where you actually worked. If language proposed by the employer’s form contract is onerous or overbroad, softened terms that ensure the employer’s real interests are protected but without unfairly imposing upon your interests is always reasonable.

Where broad language is problematic, it is reasonable to propose more precise, mutually fair language that protects both parties’ interests. For example, if the employer’s form contract provides that the call schedule is “as assigned by Employer’s Board of Directors in its discretion,” the contract would be improved for you with more precise, mutually fair language. For example: “The call schedule is assigned on an equal basis as other physicians employed by the employer.”

In conclusion, the process of obtaining a good contract is not served by obsessing about what would be perfect in an ideal world. Rather, judiciously proposing changes that are reasonable, mutually fair and precise, and consistent with your assessment of your bargaining strength, will foster a good start to the employment relationship and enhance your chance of signing a good physician employment agreement.

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