Carrie Douglas Member, Health Care Law carrie.douglas@clarkhillstrasburger.com Physician Employment Contracts: Pearls for Contract Negotiations TEXAS PAIN SOCIETY November 7, 2020 10th Annual Scientific Meeting 1
Disclaimer • This presentation is for informational purposes only and is not to be construed as legal advice. No attorney-client relationship is created by the dissemination of this material, or by any responses to live questions from audience members. Please consult a lawyer when negotiating your own contracts. 2
Doctor • (doc’ter), n. any of a number of medical professionals who use a variety of therapies to make sick people well enough to sue 3
Lawyer • ( ˈloi - ər,ˈlôyər ), n. a person who extracts the truth from a situation before concealing it. 4
The Three Pearls Physicians Need to Keep in Mind when Negotiating Employment Contracts • Pearl 1 — Independent Contractor versus Employee • Pearl 2 — Termination Provisions • Pearl 3 — Avoid Unduly Restrictive Covenants not to Compete 5
PEARL NUMBER ONE Independent Contractor versus Employee • Physicians often struggle with the decision of whether to be hired as either an independent contractor or an employee. There are several issues with each approach: – Independent Contractor ▪ When you are hired as an independent contractor, the practice is not required to pay its typical share of payroll taxes (i.e., unemployment or Medicare). Also, the practice is not required to provide the same level of benefits. – We would encourage you to incorporate so the practice is hiring your PA or PLLC versus you directly. ▪ It is much harder to enforce a non-compete against an independent contractor since the essence of the job is that they could arguably work for multiple practices. • Key takeaway is to consult with counsel to structure the relationship properly based on the job criteria.
PEARL NUMBER ONE Independent Contractor versus Employee • Employee – The practice can bill and collect on behalf of the Employee. The practice has more control over the Employee’s schedule. The practice has greater ability to enforce non- competition provisions. – When the practice hires an associate as an Employee then the practice must pay payroll taxes. The practice may provide benefits.
PEARL NUMBER TWO Termination Provisions • Always keep in mind that these contracts are not guarantees of being employed. • Each contract is really only as long as the duration of the termination without cause provision • Really understand the events listed in the contract that can trigger a termination: – Termination without cause provisions – Any event that the employer deems detrimental to the employer – Suspension of privileges, including license suspension – Events of moral turpitude – “Material” breach of contract – Illness – Disability
PEARL NUMBER TWO Termination Provisions • Vague provisions should be clarified • Do you have the right to terminate the contract without cause? • Will you receive any share of the collections/billings post-termination? – if so, for how long? Try to negotiate at least a 6 month continued pay out. • Who notifies the patients when you are leaving the practice? • Tail Coverage
PEARL NUMBER THREE Restrictive Covenants Not to Compete • Key components of the non- competition provision include: – Length of the term (in years or months) – Geographic limitation (e.g., a certain radius in miles or counties) – Provisions for exception (e.g., teaching, different specialty, working as a medical director for a noncompeting company) – The buyout (specific to Texas)
PEARL NUMBER THREE Restrictive Covenants Not to Compete • The law generally provides that unreasonable covenants not to compete will not be enforced. • Proving this “unreasonable” nature requires litigation, time, and considerable legal expense. • Some employers may not want to be involved in this legal fight rendering the physician employee unemployable during the non-compete period. 11
FINAL POINTS TO REMEMBER • Contracts are legally binding – Review all documents – Don’t accept an offer unless you are sure you want this job • Verbal contracts may be legally binding but difficult to prove • Just because a contract references an independent contractor does not mean a court or an agency will agree • It is within your rights to negotiate and employers do not take these efforts as insults • Know your rights and contracting goals • Know how to best protect those rights
FINAL POINTS TO REMEMBER • Hold off making major purchases until you are certain the arrangement will work. This includes: – Buying a home – Investing in property – Buying a car 14
FINAL POINTS TO REMEMBER • Seek legal review – Attorney with healthcare experience – How long will the review take – Will you or the attorney negotiate terms – Expected legal fees 15
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