Ask An Attorney: Post-Residency Employment Agreement Considerations
Q: I just finished my residency and received a lucrative employment offer, what are the next steps?
A: Congratulations! Unlike other industries, a common practice in the health care industry is to have a written employment agreement. Therefore, the first step in assessing any new employment offer is to carefully review the employment agreement. Although it may be tempting to go about this review on your own, we strongly recommend that you engage an experienced health care attorney to assist with this process. For you (and other physicians just finishing their residency), this may be your first employment agreement and you likely haven’t had much guidance on what should (or shouldn’t) be in the agreement. Given the intelligence and level of education necessary to get to the point of a post-residency employment agreement, it is likely that you will be able to grasp the meaning of the provisions in the agreement and even catch some unfavorable terms. It is less likely, however, that you will be able to identify beneficial terms that are missing from the employment agreement or understand how specific provisions are commonly negotiated. An attorney can help make sure you don’t miss any opportunities.
Q: Are there certain provisions that I should focus on when I review my first employment agreement?
A: Although it is important to carefully read the entire employment agreement, there are certain provisions that require special attention.
Two such provisions are the “term” and “early termination” provisions. The “term” provision should clearly identify the date on which you start your employment and the date on which your employment terminates. It should also clarify whether the agreement simply expires at the end of the initial term or whether it automatically renews for additional terms. The “early termination” provision is equally as important. This provision may contain “for cause” or “no cause” language (or both). “For cause” termination will be found in any well-written employment agreement and allows a party to terminate the employment agreement if the other party materially breaches its terms. A “no cause” termination provision allows a party to terminate the agreement at any time (and for any reason) by providing notice to the other party.
The following example illustrates the importance of the term and early termination provisions in an employment contract. We recently advised a client who accepted an employment offer only to receive a more attractive offer shortly after she signed the first offer. The employment contract for the first offer was a well-written agreement which was negotiated by both parties and had clear term and no-cause early termination provisions. Based on the clear and unambiguous contract terms, our client was able to provide a notice of termination to the first employer, which took effect prior to the commencement of the term of the contract. Because the termination occurred prior to the start date, our client was free to accept the second job.
The early termination provision, however, is not always favorable to the physician. When a physician insists on having an early termination provision, we often see the employer insist that the provision be mutual. In other words, when you want the right to be able to terminate the agreement upon notice to your employer, your employer will typically insist that it has the right to terminate you upon the same notice. The result is reduced job security despite having a written employment agreement.
Another legal issue we have recently seen surface because of an early termination provision is patient abandonment. Patient abandonment is a type of medical negligence that occurs when a physician improperly terminates the doctor/patient relationship, which results in harm to the patient. This issue is more of a concern in rural health care systems than in larger health care systems since there are less colleagues available to cover patients when a physician terminates his or her employment. That said, this doesn’t preclude you from including a termination provision in your employment agreement, but a longer notice period (e.g., 180 days instead of 30 days) may be more appropriate.
In addition to the term and early termination provisions, it is important to ensure that all the details you have discussed with your prospective employer have made their way into your employment agreement. Some key provisions to look for include: job expectations (e.g., necessary credentials and licenses, scheduling, team meetings, on-call coverage, etc.); compensation (e.g., base salary, pay frequency, bonus structure); benefits; malpractice insurance coverage (be sure to understand whether the employer offers tail coverage which provides coverage after the policy expires or is cancelled); office location and equipment; and number of support staff. Though this list is not intended to be exhaustive, it will provide you with a good start on items to look for in your first employment agreement.
Q: I noticed that my employment contract has a “non-compete provision” – is this common and does it prevent me from taking a new job after my contract is up?
A: Non-compete provisions are standard in physician employment agreements. A non-compete provision is a clause in the agreement the prevents an employee from working for a competitor after the termination of the employment agreement. At first blush, most physicians (and non-physicians alike) disfavor non-compete provisions. In fact, we have even seen physicians walk away from employment opportunities because the employer refused to remove the non-compete provision from the employment agreement.
What many people don’t understand about non-compete provisions, however, is that they must be reasonable in order to be enforceable. For example, a provision that prohibits you from practicing any type of medicine whatsoever following the termination of your employment will likely be unenforceable. A non-compete provision must be tailored to protect the employer’s interest and cannot be unduly burdensome on you. It must also be reasonable in terms of both its time period and geographic scope. While it is unlikely that your employer will agree to completely remove the non-compete provision from the employment agreement, you may be able to negotiate a narrower scope. This may include limiting the geographic area, shortening the time frame, or even limiting the scope of the provision to cover only specific specialties or specific health care systems. This is yet another reason to enlist an experienced health care attorney to help you.
Reprinted with permission from the May/June 2023 issue of The Bulletin from the Monroe County Medical Society and available as a PDF file here.
Brandon M. Ball is an associate attorney in Underberg & Kessler LLP’s Corporate & Business, Creditors' Rights, Health Care, and Municipal Law Practice Groups. He can be reached at email@example.com or 585.258.2858.
 Note that, since benefits often change and are generally the same for all similarly situated employees, these may or may not be included in the employment agreement. If they are not included, you should be sure to ask for and review any documentation that describes your benefits.