3 things every physician should understand before signing an employment contract

December 23, 2020 | Written By Jay Klimes

Are you finishing a residency program and almost an attending physician?

Are you relocating to a new geographic area, and therefore a new medical practice?

Has it been awhile since you have done a deep dive of an already existing and binding contract?

Thoroughly reviewing and understanding your employment contract can provide a sense of comfort during your journey as an attending physician. An employment contract is a lengthy, technical document with multiple components that are meant to spell out the lay of the land from pre-employment to post-termination and every situation in between. This article scratches the surface of a few main components in an employment contract that you must understand before entering a potential multi-year, million-dollar-plus binding agreement.

Compensation-It’s More Than Just a Salary

One of the highlights of becoming a physician is that, in theory, you will be generously compensated for the medical expertise you provide patients, and why not? You spent countless hours in the library reviewing Netter, took tough examinations, and interviewed at programs across the United States. But what if I tell you that your bi-weekly direct deposits do not constitute the entire gambit of compensation for a physician? That’s because compensation is not only how much money gets deposited into your personal bank account, but also how much money stays in your account. An easy way to ensure that you are maximizing your potential income is to include other fringe benefits in your contract negotiation. A few examples are:

  • Relocation expenses: If you are relocating to a new geographic area, negotiate your moving expenses into the contract. This can take the form of reimbursing you for any reasonable moving expenses, or the medical practice directly paying the moving company.
  • Continuing medical education expenses: Like lawyers, physicians devote time and resources to maintain their CME hours required by their licensing boards. Another way to increase compensation is to negotiate that the employer pays or reimburses reasonable expenses incurred resulting from continuing medical education activities.
  • Accurate salaries: Salaries differ by specialty and geographic location, so make sure you are being accurately paid for your work. A stagnant salary does not reflect your services for the work provided, so make sure there is at a minimum an inflation kicker to keep your income increasing over time.


Medical Malpractice Insurance-When am I Covered?

Like other professional careers necessitating insurance coverage, physicians must protect themselves when a claim arises from injury or death of a patient. This seems rather straightforward, however there are circumstances when physicians think they are covered, but not as insured or protected as they may believe. Some examples include:

  • Tail/nose coverage: If you leave one medical practice and join another, it is imperative to reexamine the contract of your outgoing medical group and understand the coverage offered by the new medical group. “Tail” or “nose” insurance coverage covers you if a claim is made stemming from a medical encounter while you were previously covered under a different medical group’s malpractice insurance. The employment contracts must define whether “tail” coverage is offered by the previous employer, or “nose” coverage is offered by the new employer. If neither your previous employer nor your new employer offer “tail” or “nose” coverage, you may be forced to pay significant out of pocket expenses to ensure your protection.
  • Criminal activity or sexual misconduct: It is highly improbable that an insurance company will insure a claim against a physician if the basis of the claim stems from criminal or sexual misconduct.


Is a Non-Compete or Non-Solicitation Agreement Allowed?

The days of staying with the same employer for your entire professional career are dwindling, so you need to make sure that you can practice medicine whenever and wherever you wish. Frequently, employers will institute a covenant not to compete and not solicit patients or employees into an employment contract. A covenant not to compete generally states that once a physician leaves the medical practice, they are disallowed from practicing medicine in a certain geographic area for a designated period. Similarly, the covenant not to solicit articulates that the departing physician cannot recruit patients or employees to a different medical practice. Several states have enacted legislation that makes non-competes outright illegal or provides strict rules regarding enforceability. However, most states still allow for non-compete clauses. In states where non-competes are legal, employers will tip-toe the line of what are “reasonable” restrictions. Physicians need to know when the employer has crossed the line with employment restrictions.

If you read this article and are uncertain about your compensation, malpractice insurance coverage, covenants to not compete or solicit, or another portion of your employment contract, make sure to contact me before signing the dotted line. I take physician employment contract review seriously, not only because it is my career, but also because my wife is a physician, and these terms and clauses included in an employment contract can have far-reaching effects. For an in-depth analysis of your current or prospective contract, reach out to me at Jay.Klimes@Parlatorelawgroup.com.

**This article is written for a physician’s perspective, but also applies to dentists, physician assistants, nurse practitioners, and other medical professionals.**



Jay Klimes is Counsel at Parlatore Law Group and focuses his practice on entrepreneurship, small business development and intellectual property in the medical field. He assists physician and healthcare professionals looking to start medical practices with patent and trademark licensure, in addition to negotiating contract review, and creating and implementing strategies for steady growth. 

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