Negotiating Contracts: What You Should Know

January 18, 2011


By Adrienne Foley

Whether you one day join a group medical practice or hire your own employee, entering into an employment agreement probably will occur during your professional medical career.

According to employment attorney Wayne Outten, managing partner of New York City-based Outten & Golden LLP, every employment contract should cover basic business issues such as the term of employment; the employee's title, duties, and responsibilities; the basic compensation package; the basic benefits such as insurance and vacation; and any special compensation arrangements such as stock options or supplemental retirement benefits.

Other business issues might include a car allowance, club dues, financial counseling, tax return preparation, and a relocation package, to name a few.* Before you sign on any bottom line, however, you need to consider several things, says Outten.

1) Review Your Contract with an Attorney.

Why is this important? The short answer, says Outten, is that the document may not fully and accurately reflect the deal you think you're getting. "I can't tell you how many times I've seen professionals who get an offer letter and they think they're getting certain things, and it turns out they're not," he says. "One rule of thumb: If it's a consideration that is important to you, you need to run it by an attorney." While it's best to have an employment attorney review the contract, Outten says having any attorney review an offer letter or contract is better than having no attorney at all. To find an attorney, ask your peers or search online for one.

2) Choose Written over Oral.

"There's an old saying that 'an oral agreement ain't worth the paper it's written on.' I have to agree," says Outten, who emphasizes that an oral agreement can work only if you can prove it, which often is difficult, if not impossible.

With an oral agreement, the parties may have a misunderstanding about what was agreed upon," he says. Though not ideal, a mere exchange of emails is better than nothing in writing, and it may be sufficient to prove the terms of an agreement.

"Usually there's not much disagreement about salary or reporting structure, but there may be some disagreement about bonuses or termination policies," he says. "A lot of people, including doctors, think they cannot be fired without good cause, but that's just not the case. Virtually all private sector, non-union employees are employed 'at will' unless stated otherwise in a contract."

3) Restrict the Restrictive Clauses or Covenant.

The fact is, says Outten, employers typically like restrictive clauses (such as non-compete clauses), and employees do not. That's because such clauses protect the employer's interests but prevent the employee from getting another job.

Generally, restrictive covenants are enforced to the extent that they are reasonable in duration and scope, though enforceability varies by state. "Employees should avoid these or make them as short and narrow as possible — short in terms of time frame, and narrow in terms of the nature of duties, the kinds of companies you cannot work for, and the geographic area in which you cannot work," says Outten.

4) Don't Lose Your Tail.

Physicians have professional liability insurance that, like all insurance, has a term. Tail insurance is added or supplemental insurance that protects a doctor against any medical malpractice claims that may be filed after he or she leaves the practice. Outten says it's important for a doctor to negotiate a commitment that the practice or employer will provide tail insurance to protect against such claims.

*From "Representing the Executive," by Wayne Outten. Appearing in: Executive Compensation, Editors Yale D. Tauber and Donald R. Levy, 2007 Bureau of National Affairs, Inc.