As you may recall, Nixon Law Group has written a series of posts over the years addressing employment contracting from the physician perspective. One of our readers reached out recently to let us know that we should, likewise, address physician/clinician employment contracting from the perspective of the healthcare employer. This reader was absolutely right, and we write now to remedy this oversight!
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The Type of Working Relationship You Envision Dictates the Type of Agreement You Need.
There are three key worker categories that will influence how the working relationship you envision should be papered: Independent Contractors, At-Will Employees, and Contract Employees. If you wish to contract with a clinician to provide services as an independent contractor versus as an employee, it is important to determine whether the clinician can be properly classified as an independent contractor. In addition to federal tax consequences, there are also state tax considerations and liability implications with respect to whether an individual is appropriately classified as an independent contractor or as an employee.
When deciding whether to maintain the at-will nature of the employment relationship (for those employers in at-will states), there are a number of pros and cons to consider. One of the most common issues healthcare employers will want to weigh is notice. HINT: If your current agreement requires that the employee provide you with notice of his/her intent to leave the position, you may have inadvertently altered the at-will nature of the relationship. If you wish to maintain the employee’s at-will status, a well-structured Offer Letter, used in coordination with other employment-related documents, may better suit your needs than a traditional contract.
Speaking of Agreement Types: Do Not Assume Contracting with a Clinician is the Same as with Other Types of Workers.
We often see healthcare employers try to use standard, industry-neutral form agreements for employing or staffing clinicians. We understand – it is quick, cheap, easy, and many are right there on the internet for the taking. However, fixing what can go wrong by doing that… Well, suffice it to say that it will be quicker, cheaper, and easier to make sure you have the right type of agreement from the outset.
Healthcare is the most heavily regulated industry in the United States, having surpassed nuclear power several years back. It should come as little surprise, then, that these regulations can have a serious impact on healthcare contracting, including hiring or otherwise engaging clinicians. For example, there are significant fraud and abuse implications—for both the employer and the clinician—that relate back to our first consideration of independent contractor versus employee. The legality of a compensation structure can turn on whether this classification has been made properly. Another common mistake we see is thinking that the phrase “medical records” can simply be added to standard confidentiality provisions and/or a non-disclosure agreement.
Think of the Employment Agreement (or Offer Letter, as the case may be) as Just One of the Tools in Your Tool Shed.
For employers who hire different types of clinicians and who need to strike a balance between flexibility/adaptability, on the one hand, and specificity, on the other, a great solution can be to think of the employment agreement or offer letter as the universal terms for your clinicians and the guidepost toward the specifics. (Note that, if you also employ non-clinicians, you will likely need at least two versions of your main employment agreement – clinical and non-clinical.)
For example, you probably expect all of your clinicians to perform the job they were hired to do (a universal), but what that job is may not be the same for everyone (the specifics). Rather than a detailed, customized agreement, it may make sense to simply state the expectation that the employee will competently and diligently perform the duties and fulfill the responsibilities of the position, as set forth in the attached job description (the “Job Description”), which Job Description may be modified from time to time by Employer by providing a written copy to Employee. Not only does this type of approach avoid the need to customize every agreement for each different position, but it can allow you, as the employer, greater flexibility to make adjustments as the needs of the organization change. Other obligations specific to all employees of your practice can and should be captured in an Employee Handbook (e.g., Bring Your Own Device (BYOD) policies, leave policy, discipline policy, workplace search policies, dress code, etc.).
The Almighty Restrictive Covenant Provisions
Once of the most important (and, therefore, more negotiated) parts of the clinician employment agreement process depends upon crafting specific, enforceable restrictive covenants. These include (1) the Non-Solicitations (patient and employee), (2) the Non-Disparagement, and (3) the Non-Compete. Non-solicitation provisions can protect the employer by preventing a departing clinician from reaching out to all of your staff and patients and telling them that they should join the clinician when he/she leaves. However, patient non-solicitation provisions must be carefully drafted, so as not to be interpreted as impermissibly interfering with patient choice of provider and/or the patient’s right to authorize the release of their records. The non-compete is equally important. The last thing you may want is a well-liked clinician with a generous patient panel leaving your practice and setting up shop in a shiny new building across the street.
Restrictive Covenants are generally disfavored by courts because they are viewed as a restraint on a person’s right to make a living. Therefore, it is very important to have a qualified attorney draft this language in your agreements to comport with your state’s laws—if a court rules that your non-compete is overbroad or too stringent, it could strike it, leaving you without any protection from a former employee.
Negotiating with the Clinician
Your ability to retain the clinicians you hire begins at this early contracting stage. This sets their initial impression as to whether they feel valued or like just another cog in the machine. This is where they get a sense of how reasonable you will be as an employer, and it is where they will start to form their opinions about how long they might like to stay with you. For these reasons, you want to make sure that person is a good fit AND help them understand, in real terms, what it will be like to work for you, so that they are not surprised once they accept and end up deciding after the fact that the position does not meet their expectations. I encourage all of my employer clients to:
Very clearly define what that new hire’s day-to-day working life will be like:
Is there a lot of administrative work? Non-clinician supervision?
What are the normal hours for the clinicians there (not just the office hours)?
How often will they be taking call and on what schedule?
Is the clinician expected to participate in marketing or other non-clinic activities?
Very clearly describe the levers that determine how that person maximizes their take-home pay:
Is there a quality aspect to their pay?
If so, how can they achieve the required measures?
If you have an RVU-based payment model, how much actual time is needed to meet or exceed RVU targets?
Be clear about whether there is an opportunity in the future for that clinician to become an owner or leader in the practice or organization:
What are they working toward?
How do they “move up” (i.e., what advancement opportunities may be open to them)?
How long does it take, on average, to achieve such advancement?
There will be more to come from the healthcare employer perspective, but be sure to check out our employee-perspective posts: Six Things to Watch Out for in Physician Employment Agreements , Physician Employment Contracts: The Compensation Package , and 7 Common Mistakes Physicians Make When Signing a Physician Employment Contract (and How to Avoid Them).