- Why are you starting a business?
- Is this a new business or a conversion of an existing business?
- Will any of the owners be business entities rather than individuals?
When starting a business you will have choices as to how you will conduct your business. The short summaries that follow are not the only choices, but are the most common. Read more
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.
Purchase of a Business
When you purchase a business an important consideration is the ownership of Intellectual Property of the purchased business. Make sure you complete an appropriate search for patents, trademarks and copyrights. In addition, review the secretary of state for information on registrations of names under which the purchased business does business. This may have an impact on the purchase price of the business.
Intellectual Property can be registered at state and federal levels. The federal compilation is quite easy to access and search online at www.uspto.gov. Information is also available at the Arizona Corporation Commission and Secretary of State of Arizona as well as other states Secretaries of State. It is important prior to starting a business to determine if some other business is using the name you select. You must evaluate the scope of use of the trademark you want to use and assess the risk that some other person may have already been using the name. Make sure you do the search prior to forming the company or labeling the product.
Employees and Contractors
Only a written agreement will protect the ownership of the Employer or a company using a consultant to generate Intellectual Property. As an example, if you pay a consultant to write software for your company and do not have a written agreement, the consultant will own the copyright to the software and be able to sell it to anyone. You must have a written agreement to specify which of the parties owns the Intellectual Property. You can declare the consultant is hired with a clause stating the software is a “work for hire” and that your company owns the Intellectual Property rights. You must have an agreement with employees, sales representatives and hired engineers to establish the actual ownership of the copyright to the software.
Arizona Corporation Commission and Tradenames
Just because the Arizona Corporation Commission clears a name, it does not mean that you have not violated some other persons previously registered tradename. The standard the Arizona Corporation Commission uses is not the same as the analysis done federally for a tradename. The standard is the likelihood of confusion in the mind of a consumer. This is not a very precise definition or standard to use, causing litigation to be a real risk. In addition to Arizona Corporation Commission clearance you should also review all tradenames with the Patent and Trademark Office to determine risks involving ownership of intellectual property.
Business succession planning is the establishment of a plan to provide for the orderly transfer of the management and ownership of a business to avoid taxes and litigation to ensure the family or control person’s objectives. Many of the considerations are similar for family businesses and for non-family businesses. The general purpose is to provide for continuity of the business and transfer an apportionment of assets to the next control group.
The liquidity needs of the owner must be considered and the timing and manner of the transfer determined. The owner can do any of the following: sell the assets, sell the stock, do a tax free merger, do a tax free division, sale to an ESOP, sale to employees, sale to family members, sale to grantor trusts, transfer equity interests to a grantor retained annuity trust (GRAT), leave the interest by will to family members or liquidate the business, including bankruptcy. Each of these options has unique aspects and should be examined in the specific situation of each business.
Taxation is a large consideration in the structure and each of the above options has different tax treatments. One provision is §6166 of the tax code provides that an estate tax attributable to closely held businesses may be paid in over two to ten equal installments. Life insurance may also be used in business succession planning to provide liquidity.
This requires a definitive plan, not just a hope. Information needs to be gathered, advisors selected and discussions with family members completed. Valuation of the business is at the core of any plan. Estate planning documents need to be reviewed. The family needs to agree on the concepts of business succession planning and the difference between management and ownership with the goals of all parties considered. Exit strategies of the family should be considered and a suggested plan discussed. The owners will also have to consider the cash needs of the business during this process. A list should be established of all documents needed to carry out the plan and an annual review should be put in place to analyze the plan and make any changes necessary.
Many contracts have an Arbitration Clause that require that disputes be settled by arbitration and not be taken to civil court. The advantage to having an Arbitration Clause is that it can be less costly to arbitrate, the parties can control the issues and the resolution of the dispute and the case can generally be resolved quicker. Read more
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.
What is This?
A simple option provided to new clients is the chance to get big picture advise on your situation for a fixed fee as an initial consultation. Many times you just need to know what is going on, not to enter into an extensive research situation costing thousands of dollars. I will spend one hour with you at a reduced rate to explain your situation and the options you have. This is like having an attorney on staff for quick questions and general guidance on business and legal issues.
I can provide services to resolve business disputes with partners, members, third parties, vendors or any commercial situation needing resolution. Mediation is usually non binding and is an attempt to arrive at a settlement of the dispute. The Mediation takes place at my office with each party (and their attorneys, if appropriate) and I attempt to discuss solutions in a confidential manner.
If the mediation fails or if the parties desire to provide for a binding decision you can schedule an arbitration. An arbitration is like a trial that is done in a private, confidential setting. Each party presents their side of the story with exhibits and legal arguments and I will determine findings of fact and arrive at a decision on the case.
Discovery is a broad subject that casts a wide net and the Rules of Civil Procedure permit discovery into any matter, not privileged, which is relevant to the subject matter involved in the pending action. The following are procedures in place as part of the discovery process.
- Interrogatories — These are written questions given to the other side that must be answered under oath.
- Request for Production — This is a request to provide documents.
- Depositions — Testimony given under oath taken at the attorney’s office. Read more
Employee Handbooks are important to employers, large and small. The handbook can establish guidelines for employees so no confusion exists on the duties and expectations of the employer. Read more