This blog on the elements of employment contracts is by Stephen A. Manuele, Esq., a partner at Feldman Kieffer, LLP.
When dental residents finish training and are faced with their first contract, they may be overwhelmed by the amount of information to sift through. We’ll help you sort through the most important elements of employment contracts and negotiations, starting from the time you are recruited.
The lead-up to your first contract after residency may involve recruitment by an employer. You will want to know who is recruiting you. Often, hospital systems or large networks own or control private practices.
Candidates may be offered benefits and incentives as part of recruitment. These include a signing bonus, relocation expense reimbursement, student loan repayment and an income guarantee. You should be careful of claw back provisions in any contract you are presented with. Sometimes, an employer will try to claw back, or force you to repay, part of the recruitment benefits or incentives if you leave their employment or are terminated before the first term of the contract expires.
During or after recruitment, you may receive a document called a letter of intent. This is an outline of the terms of the employment agreement that will follow. A letter of intent is normally considered non-binding, meaning that it is not an enforceable contract. The binding terms of your employment will follow in a more definitive agreement.
A contract requires four qualities to be binding – offer, acceptance, consideration and performance. It is essential that there is a meeting of the minds between the two parties.
A physician employment agreement can be a complicated document. You will want to understand the terms of the agreement, so you know what you’re getting into. Here are terms of an employment agreement you should look for.
Duties and Responsibilities
Any agreement will set forth what is expected of you as an employee. These include expected hours worked, your administrative responsibilities, compliance with professional standards, non-clinical activities, call coverage, travel requirements, scheduling and other employer expectations. If you are being recruited into a large practice or network, you should clarify where you are providing services, i.e., at which office you will be working. If you have plans to work for other providers as a contractor, make sure the agreement addresses moonlighting. Some agreements are exclusive, meaning you can not work for another provider while you are their employee.
Term and Termination
The term of an agreement is the length of the employment relationship. Usually, the term of a professional’s agreement is at least one year. Three-to-five-year terms are common. Make sure you know when your employment starts. Often, contracts are signed before your actual start date or when performance is expected to begin.
Most agreements can be terminated, or ended, both with cause and without cause. With cause means that a party is at fault, did something to breach the agreement or otherwise did not perform. Examples of with cause include discipline, un-insurability, bankruptcy, criminal conduct or conviction and loss of privileges. Without cause permits a party to end the agreement without any reason. Ending a contract without cause typically requires the terminating party to provide notice within a certain time, usually 30-90 days, before the contract’s end date.
Compensation and Benefits
The terms of your compensation should be set forth in the agreement. Compensation should be fair market value. Compensation models vary and can include a base salary, a bonus structure and various incentive compensations. Other areas of possible compensation include call coverage and completion of administrative duties. You may be presented with a range of benefits as well. These include insurance, paid time off (PTO) benefits, continuing education dues, retirement programs, signing bonuses, relocation reimbursement and other allowances.
Insurance and Indemnification
Your employer may either require malpractice insurance coverage before you start your employment or may provide you with insurance as a benefit. If your employer is offering you professional liability insurance, consider whether the insurance is occurrence or claims made. An occurrence policy offers you more protection and covers claims made for injuries sustained during the life of an insurance policy, even if they are filed after the policy is canceled. A claims-made policy provides coverage when a claim is made against it, regardless of when the claim event occurred. If you are covered under a claims-made policy, you may need an extended reporting endorsement (tail coverage) to protect against claims that occurredduring your employment after you leave for a new position.
If there is a lawsuit or other claim made against you or your employer, depending on the jurisdiction the employer may have a right to indemnification against you as employee. This means that if you are solely at fault, an employer can seek to make you responsible for the entire loss.
A restrictive covenant is a term that prevents you from working (a non-compete) or soliciting patients or co-workers from your employer after the contract ends. Any restrictive covenant must be reasonable. It cannot be greater than what is required to protect the legitimate interests of the employer, cannot impose an undue hardship on the employee and cannot injure the public. For example, a non-complete clause must be limited in scope. This includes the length of the restriction (e.g., 1 year), the geographic distance of the restriction (e.g., 10-mile radius from the employer’s location) and type of work you cannot perform.
All of these are elements of employment contracts that dental residents should be familiar with as they prepare to negotiate their first offer. For more information on employment contracts, read our blog on the important provisions to review before signing. Remember, always be cautious and make sure you understand the whole document before you put pen to paper!