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EMPLOYMENT CONTRACT FAQs
FIVE FAQs REgARdINg EMPLOYMENT Second, many contracts contain illegal terms. These terms
would not be enforceable in a court of law and thus are not
CONTRACTS
legally binding on you regardless of your signature on the
By Barbara Hensleigh, Esq.
contract. One common example is a term permitting your
employer to assess monetary penalties against you for
Signing a contract always takes careful consideration. This is
violating policies or procedures of the employer or taking too
even more true when entering into a professional
much time off (even uncompensated time). It is good for you
employment relationship. Having reviewed more than 100
to know, and good for your employer to know you know, that
physician employment agreements, I know well the most
these clauses are illegal and unenforceable.
frequently asked questions. The top five questions are:
Third, you may be surprised by the negotiating power you do
1. Do I need an outside review of the contract?
have. I have seen employers change language to:
2. Can I be employed full-time at a medical group as • Pay for tail coverage upon contract termination;
an independent contractor? • Include language making call schedules equitable;
and
3. Who is responsible for paying insurance tail
• Add a termination provision requiring written
coverage upon termination of the employment?
notification of any breach of the agreement and an
4. What are the differences between opportunity for the physician to “cure” any breach
non-competition clauses and non-solicitation before termination of the agreement.
clauses?
Finally, as you develop your practice and business skills, you
5. Can you explain the interplay between the term of
may be called upon to sign contracts. Understanding the
the agreement and the no-cause termination
importance of reviewing them yourself and having counsel
clause?
review them can avoid pitfalls seen in litigation over contract
interpretation.
1. do I Need an Outside Review of My
Employment Contract? 2. Can I Be Employed Full-Time at a Medical
Let’s face it: Many physicians sign contracts without reading
group as an Independent Contractor?
them, much less having outside counsel review the
Designating an employee as an independent contractor is a
agreement. You are just too busy. Moreover, the contracts
charade and also is not in the best interests of the physician. I
may be take it or leave it. The employer may be unwilling to
recommend that physicians reject independent contracting
change the terms and lose uniformity in contractual language
designation clauses.
among its employee physicians.
The law treats employees and independent contractors
But there are plenty of reasons to spend the time and money
differently for tax, liability, and worker’s compensation
for an outside review. First, it is good to know your obligations
obligations, among other things. Here are the major
up front. For example, many employers incorporate into their
differences between being employed and serving as an
contracts their general policies and procedures and contracts
independent contractor:
between the employer and managed care plans. By
• As an employee, your employer is responsible for
incorporating these documents into the agreement, the
some of your taxes. As an independent contractor,
employer has made their terms — which you probably have
you are responsible for all tax payments.
yet to see — legally binding on you. Knowing the policies and
• Under California law, an employer is legally
procedures and managed care agreements are contractual
responsible for the work of an employee (and thus
commitments by you may encourage you to read and
likely to purchase professional liability insurance).
understand the policies and procedures and other agreements
As an independent contractor, you alone are legally
so you know what is expected of you.
responsible for your conduct.
22 New Family Physician Toolkit
EMPLOYMENT CONTRACT FAQs
• An employer is responsible for obtaining coverage valid and enforceable through legal means.
for any harm that befalls workers on the job. As an
independent contractor, you are on your own. Non-solicitation clauses attempt to prohibit you from
recruiting patients or employees of the medical group to your
Because of the advantages, some employers attempt to recast new practice. Clauses strictly prohibiting solicitation are legal.
employees as independent contractors. Using the label alone, However, many solicitation clauses purport to prohibit the
however, does not change an employee’s status. Courts physician from contacting patients regarding the physician’s
usually see through the charade. If you are working full-time departure from the medical group. This provision is unethical
at hours set by the medical group, under the supervision of and illegal. Patients have an absolute right to know the
the medical group, you are likely an employee, regardless of whereabouts of their treating physician. An announcement
the terminology used to describe your status. card sent by the physician to former patients simply
identifying the new practice location is not solicitation: it is
information legally protected.
3. Who is Responsible for Paying Insurance
Tail Coverage upon Termination of the
5. Can You Explain the Interplay Between the
Employment?
Term of the Agreement and the
Tail coverage provides professional liability insurance for those No-Cause Termination Provision?
cases arising out of work you performed for a medical group,
but where the claim is made after you leave the group. Typically, physician employment contracts are for the term of
Probably the hottest negotiation point is whether the one or two years; however, they routinely contain a provision
employer or employee should pay for tail coverage. The permitting either side to terminate the agreement with a 60-
answer is not clear and the costs may be significant, or a 90-day notice for “no-cause.” This clause effectively
particularly if you have provided obstetrical care. negates the term of the agreement by permitting either side
to unilaterally change the term by terminating the agreement
I contend that under California law the employer is responsible for any reason or no reason. Nonetheless, the term has a
for the acts of the employees, regardless of when the claim purpose. It generally sets the date for the parties to reassess
was made. Accordingly, it is up to the employer to mitigate their relationship to one another after the term period. For
against the risk of liability by purchasing malpractice example, following the initial term many medical groups will
insurance, including tail coverage. Due to the significant consider the physician for shareholder status or reassess the
expense, many employers attempt to shift the burden of the compensation package. Some employers agree to pay for tail
cost of tail coverage onto the departing employee. coverage if the physician completes the term of the
agreement. Thus despite this seeming inconsistency, the term
language and “no-cause” termination provision reside in
4. What are the differences Between
harmony in the physician employment agreement.
Non-Competition Clauses and Non-
Solicitation Clauses?
Now that you have answers to the common questions,
Employment contracts often contain non-competition clauses the issues related to reviewing physician employment
or non-solicitation clauses, and sometimes both. Non- agreements and the negotiations surrounding them
competition clauses attempt to prohibit the employee from are not that complicated. Nevertheless, there are
practicing in the geographic area of the medical group within many good reasons to have an attorney review your
a certain time period at the end of the employment contract before you sign. If you do retain counsel to
relationship. These clauses are illegal and unenforceable in review the contract for you, be sure to familiarize
California. Employers sometimes include the clauses in the yourself with the attorney’s qualifications and obtain
contracts because they guess (often correctly) that a physician an estimate of the cost of the review.
will not obtain legal advice and presume that the clause is
New Family Physician Toolkit 23
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