Whether you’re starting your first position as an attending physician, or you’re changing jobs part way through your career, it’s important to know how to evaluate your employment contract. It’s a given that your employer will set up a contract in a way that stacks the odds in their favor.
However, if you’re able to read through the contract and make sure it matches your personal and professional needs, you’ll be able to start your new job with peace of mind. If for some reason, you find that there’s a piece of your contract that doesn’t match what you want or need out of this role, you’re able to negotiate from a place of confidence before signing on the dotted line.
These seven topics are critical components of your employment contract and have the potential to impact you and your family for years to come.
Know Your Obligations
Your obligations, or conditions of employment, should outline everything your new employer expects of you. Think of these as your job responsibilities. Unfortunately, many physicians make the mistake of assuming they know what’s expected of them.
Then, they’re surprised when they’re asked to do more without compensation, or when reviews don’t go as well as planned due to a perceived lack of performance by their employer. Understanding what job duties you’re responsible for is critical.
For example, some physicians are responsible for limited duties including patient appointment hours, hospital rounds, and emergency room calls. However, most physicians will be expected to take on additional duties and responsibilities.
Office duties and paperwork
Reviewing lab results and blood work
Taking (and responding to) phone calls
Documenting medical records
Education and training
Understand How Compensation is Set Up
Salary negotiations are something that the majority of professionals will face at some point in their careers. However, physician compensation can be especially complex. Of course, start by digging into your base salary. This number needs to be enough to cover all of your family’s basic expenses and then some. You want enough wiggle room to start working toward savings and debt repayment goals, while still being able to enjoy your life.
Check to see how your compensation is earned. In many cases, a physician’s salary isn’t a straightforward number that’s earned through static job duties. Instead, employers are now incorporating a productivity component in compensation. Productivity usually correlates with how much clinical care you’re providing.If there is a productivity stipulation as part of your compensation, you want to make sure that your other job responsibilities won’t dramatically cut into your ability to provide clinical care. Administrative duties or time spent on training new colleagues could harm your ability to earn. Finally, it’s important to look at other types of compensation restrictions or allowances. For example, many employers will offer a bonus plan that’s written in a way that makes it difficult for employees to earn an incentive bonus. You want to know the exact way incentive plans are calculated, and whether there are any stipulations (like waiting for a site to “break-even” before paying out incentive plans).
What’s Your Contract Term?
Your employer may write in a contract term. In short, this defines how long the contract is expected to last, whether or not it can be renewed, and what terms need to be met for renewal. Unfortunately, these contract terms are often much longer than physicians anticipate.It’s important to know how long you’re signing on to work with this specific employer within this role, and whether or not there are ways to increase your earnings during that time frame. For example, you don’t want to work somewhere for 5+ years without any opportunity for a cost of living or salary increase based on performance incentives.
Check Defined Terms
In your contract, you may see certain terms either bolded or italicized. Typically, these are “defined terms” and will have written definitions at the end of your contract. It’s easy to skip looking over this section, but it’s important! Take a look at some of these frequently-used defined terms:
This provision often means that, after your contract term is up, the contract will stay intact year-to-year.
If your employer can terminate your contract “without cause” they don’t need a clear reason to let you go. You could be an ideal employee, and they can still terminate your contract. Your best bet here is to negotiate for more notice so that, if they choose to terminate, you have plenty of time to find a new role.
This indicates that your employer can modify the terms of your employment contract at any time, without your consent.
A waiver provision at the end of your contract gives your employer the flexibility to adjust previously agreed upon terms - like work hours.
This prohibits you from assigning your contract to someone else.
This puts your contract under the “controlling law” of the state where your employer is headquartered. It’s especially important to note this if your employer is headquartered in a state other than the one in which you work.
Your employer may have a unique definition of professional misconduct that could result in termination. Know exactly what’s expected of you (and what “misconduct” means with this employer) to stay in good standing.
Are Fringe Benefits Available?
Salary and bonus structure are both important. However, fringe benefits are an equally critical component of your contract. Be on the lookout for benefits that you and your family either need or want. This might include:
Student loan reimbursement
Continuing education opportunities
Vacation and sick leave
Insurance (life, disability, health)
Gym membership options
Discounted local services
Some fringe benefits are a “nice to have” while others are a “need to have.” For example, insurance and time off should both be a clear part of your contract where a gym membership or loan reimbursement might just be the icing on the cake.Pro-Tip: Don’t forget that an employer match is only allowed to be on $285,000 (2020 IRS Limit). Don’t make the mistake of assuming the match in on your full salary, if your salary is higher than the compensation limits.
What are the Implications of the Termination Provisions?
Do you know what could lead to a termination of your contract? Ideally, your contract will outline termination provisions that benefit both you and the employer. For example, your employer may be able to terminate your contract “at will” with notice, and you may be able to terminate your contract after your contract term is up with notice, as well.
That being said, there are times that employers write termination provisions that lean heavily in their favor. Some employers can terminate contracts with their physicians for the following causes:
Illness and disability
Breach of contract
In some cases, employers don’t even need a reason to terminate your contract. Ideally, in these situations, you should seek professional legal advice to negotiate stipulations in the contract that makes it easy for you to recover if the contract is unexpectedly terminated. This might look like severance pay or a longer contract termination notice.
Is There a Non-Compete In Place?
Non-competes are often the source of a physician’s frustration as they look to make the next move in their career. Too often, when you first get hired, you view your employer through rose-colored glasses. Both you and your employer are entering into this arrangement with the expectation that your employment with them will be long-term and beneficial for both parties.When you start to consider another position either due to burnout, an exciting new opportunity, or just because your existing employer isn’t everything you thought they’d be - a non-compete can get in your way.
Usually, a non-compete will be set up to last a set amount of time (either years or months), have a geographic location, and offer specific exceptions. So, your non-compete could potentially say that you’re unable to work for a competing employer for two years within your state unless you’ve decided to take a position in education or as a medical director (not a practitioner).
It’s possible to fight a non-compete, but the legal battle that will ensue is both expensive and time-consuming. Instead, do the legwork on the front-end to figure out what stipulations your non-compete has and whether they’re either negotiable, or whether you can plan your career accordingly.
Don’t Go At It Alone
Your employment contract is, without a doubt, one of the number one things that could positively or negatively impact your life and your finances. In the near future, the terms of your contract will dictate your lifestyle and workplace fulfillment. In the distant future, your employment contract could impact your earning potential, ability to grow your career, and so much more.
Regardless of whether this is your first-ever employment contract, or your fifth, it’s important to seek legal counsel when evaluating the terms you’re signing up for. Reaching out to a lawyer, or a professional who works with physicians can help you to determine whether or not the contract is written in a way that positively impacts you - or whether you need to negotiate.
I don’t care what the partners or what human resources tells you about this being a “standard contract,” hire an attorney to review the contract. More importantly, if you can find an attorney who has read that same contract numerous times, he or she can be on the lookout for different income and bonus structures.
A few possible options for Contract Reviews from The White Coat Investor.
Looking for a more thorough all-in-one spot for your financial life? Check out of free eBook, A Doctor’s Prescription to Comprehensive Financial Wellness.
Written by Chad Chubb, CFP®, CSLP®