Physician Employment Agreement


A Physician Employment Contract needs to be understood and fashioned to protect your needs.  All terms have meaning and you need to understand what they mean.  This is your life and what your compensation will be an important aspect of establishing your life going forward.  Contract examination and review needs to be proactive.  Once the agreement is signed it is too late to examine what it means and ask for any changes.  All business arrangements should be in writing and nothing should be left to verbal assurances.  If the term is worth verbally discussing, it is worth putting in writing to ensure the memories of the parties do not change in the future.

Consult with competent legal counsel before you sign an agreement.  All arrangements are negotiable and it is reasonable that you become involved in the process, ask questions and understand your rights and duties.

Compensation is at the heart of an employment contract.  Compensation can take many forms, salary, bonuses, loan repayments, vacation, profit sharing, buy in options and other benefits for medical coverage or disability insurance.  Regardless of the employer (large hospital or small practice group) you will be presented with a contract based on the situation of the employer and the market conditions of the location you select.  Remote practices in Montana are not the same as a large hospital setting in Phoenix.

Insurance is integral to provide protection to you and your practice.  Malpractice claims are increasing and the cost of insurance is rising.  Coverage is shifting from an occurrence based policy to a claims made policy.  Mobility is increasing in all business segments, including medical services.  Tail Coverage needs to be understood so you can have continuity of coverage for your practice when you move or take a new job.  Non compete clauses are extremely important to examine.  The law surrounding non compete clauses is state based, complex and evolving.

The duration of the contract is important as is under what conditions can either party terminate the agreement.  If you begin your employment and find the job less than you had hoped for or your family is not adjusting to the location, you will need to understand your rights to terminate the agreement with a minimum impact on you.  Duties need to be examined so you clearly understand what is expected of you.  Practicing in certain locations comes with required community service or limitations on what services you can provide.  You want to be treated fairly and do no more or less than all other physicians.

Make sure the agreement contains all items discussed and it is clear what you will be getting.  We can assist you in this process.  Our purpose is not only to deal with the issues in the agreement, but also to assist in educating the physician regarding contracts in general so future agreements will not be so daunting.

Physician Non-Compete

Generally, non-competes are enforceable if they are reasonable in scope and duration.  Many situations have been carved out and the analysis can be unpredictable.  The Court has also stated it disfavors non competes and that they will be strictly construed against the drafter.  Non-competition clauses are still in use in most physician contracts and are a risk to both the drafter and the physician.  In Arizona, the prevailing party in a contract dispute may be reimbursed for their reasonable attorneys fees raising the risk in a litigation situation.

Case law has provided two cases of note on physicians:  Farber and Phoenix Orthopedic Surgeons.  The Phoenix Orthopedic Surgeons case involved a restriction to the practice of medicine for three years from the date of termination within a five mile radius of the offices of Phoenix Orthopedic Surgeons.  This limitation was determined to be reasonable and was enforced.  The Court also found the covenant was reasonably necessary to protect the employer’s business interests.  Farber involved a restriction that was three years from the date of termination with a five mile radius of any office maintained by employer (calculated as 235 square miles by the Court).  This was determined to be unreasonable and was not enforced.  The Court also said: the employers interest in enforcing the restriction is outweighed by the likely injury to patients and the public in general.  The Court refused to state that it is not holding that restrictive covenants between physicians will never be enforced, but caution was given that such restrictions will be strictly construed.

With these two views of similar restrictions an argument can be made both ways on the issue of the reasonableness and the enforceability of covenants not to compete among physicians.  It is also emphasized that decisions are very fact intensive and each situation will be unique and it is difficult to predict how the Court will rule on any given situation.  As an example, if a physician was selling their practice the Court would be more likely to enforce the covenant because it was a large part of the good will being sold.