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Tips on Negotiating a Sound Physician Agreement

August 18, 2011 by  


By Adil Daudi, Esq.

I was recently invited to speak at the Michigan State University Radiology Department, in front of their Residents, on a topic that is very much overlooked by new physicians, or even experienced physicians: Understanding their employment agreement.

StethiscopeMore and more physicians entering into their profession are ignoring some of basic concepts that come with their agreement. However, there is always one clause that is never ignored – their salary. While the complexity and details of a contract can vary with depending on the employer and location, certain clauses must always be addressed. This article will illustrate the three (3) primary areas of concern that every physician, whether new or experienced, should take into consideration when negotiating their Physician Employment Agreement.

Non-Compete Agreements:

A non-compete agreement is a restriction placed on you that bars you from practicing with competitors within a specific geographic area and within a specific period of time. Two factors that should be considered: (a) Whether the state you are working in enforces non-compete agreements (Michigan does as of 1987); and (b) if your state does, are the restrictions placed on you reasonable.

In order to determine reasonableness, courts have laid out three (3) elements: (1) Geographic area; (2) Duration; and (3) Market Description.

Geographic area: In Michigan, courts have established that a 50-mile radius is deemed reasonable. Therefore, if you are terminated from your employment and you are seeking employment, anything within 50-miles from your previous employer will be unacceptable.

Duration: Case law has also established that anywhere between 18-24 months is considered a reasonable timeframe; meaning, you are prohibited from working within the guidelines for at least 18-24 months.

Market Description: It is always important to read and understand exactly what your Employer is restricting you from. If the contract states you are prohibited from practicing in the field of medicine upon the termination of this contract (and you are a radiologist), then clearly that will not be accepted as a reasonable restriction and would not be enforced. However, if it states that you are not allowed to practice in the field of radiology within the stated guidelines, than courts can consider that as reasonable.

Duties/Responsibilities

For no apparent reason, Employers tend to be lazy when it comes to defining and explaining what your job actually entails. Through my experience, I have noticed that the majority of contracts will define duties as “what is reasonably conducted in the (insert field) profession.”

It is always advised to question the employer and receive a thorough explanation on what “reasonable” actually means. There could be several implications, and more often than not, no two people will carry the same definition and meaning to the word. I always advise my clients to ensure you have a detailed understanding as to what is expected of you when you enter into your profession, and stay clear from ambiguity.

Fringe Benefits

Your employment agreement should always indicate exactly what benefits you are to receive. Furthermore, keep in mind that the variety and flexibility in your benefits will depend on the type of practice you are in. If you find yourself in a smaller practice, you may be able to negotiate a more individualized package. However, in larger practices you will more likely have a uniform program covering all employees; thus, less room for negotiating.

The following are the more common benefits that tend to be addressed the most during negotiations:

Insurance: Always make sure to ask what types of insurance you are being offered; whether it is health, dental, life, or disability. Health insurance is traditionally the most common of the four, however depending on the size of your company, employers do still offer life and disability.

Vacation: It is inevitable that you will receive vacation days, however what you may not know is whether you are permitted from carrying over those days to the following year. Furthermore, is Continuing Medical Education (CME) time included as part of your vacation days, or are they in addition to them?

Malpractice Insurance: No matter how perfect of a physician you are, or consider yourself to be, having malpractice insurance is vital. More importantly, knowing which type you have can be equally as vital. There are primarily two types of malpractice coverage that an employer can offer:

Occurrence. The physician is covered for malpractice that occurs during the period that the policy was in force, regardless of when the claim is filed.

Claims. The physician is covered for claims filed during the coverage period regardless of when the malpractice occurred.

More often than not, because of the expensive premiums associated with occurrence based coverage, you will find yourself in a claims based insurance coverage. Therefore, it is imperative that you inquire into the purchase of a “tail” policy, which covers claims that can be filed after your coverage period ends.

Whether you are a newbie or an experienced physician, always remember that employers always have their own best interest in mind. Therefore, it is important to never simply browse over your contract without giving it the attention it truly deserves. I advise every physician I have encountered, always seek the opinion and advice of a trusted professional who can provide you with a sound analysis and possibly assist you during your negotiating phase. Remember, as a physician, the large salary and healthy lifestyle is expected, but to live a peaceful life, it is the parameters of your contract, the additional clauses that make the difference.

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