3 Things to Consider in Physician Agreements

3 Things to Consider in Physician Agreements

Can Doctors Negotiate Contracts?

I’m surrounded by doctors.  No, I’m not in a hospital, I’m just married to one (a doctor-to-be, that is).  My husband is an M.D./PhD student, who recently finished his Ph.D. and is currently in his third year of medical school.   Many of our friends are medical students, residents, and fully licensed physicians.  If I had to capture the most common complaint among them it would be: too many hours, too little pay.   They all hope for the same thing, that once they complete their training, they will receive ample compensation. But, can doctors achieve compensation and benefits commensurate with their skills and experience?  Can doctors really negotiate their contracts?   Although medical residents often are in a tough bargaining position, many licensed physicians can and should negotiate their physician agreements not only for higher pay but for contract provisions that better protect them.

What are the options for residents? 

Generally, once they match, residents simply sign the contract given to them.   As a recent Slate article discussed, medical residents often are paid the hourly equivalent of the hospital cleaning staff.   A survey by the Association of American Medical Colleges (“AAMC”) found that the 2011-2012 mean for a first-year resident was $49,394.  That figure divided by 50 weeks, at 80 hours a week (the Accreditation Council for Graduate Medical Education (“ACGME”) limit), comes out to $12.35 an hour, assuming residents actually only work 80 hours a week.   The Department of Labor specifically exempts medical residents from minimum wage and overtime pay.  But, residents have begun to organize and may have a collective bargaining unit in the future, which would help them negotiate for higher pay and better benefits.  In the meantime, the advice below may still help you understand the provisions in your agreement.

You’ve finished your residency. Now what should you look out for in your agreement with the hospital or physicians group? 

From an employment law perspective, you should look into the employment status of doctors, medical leave rights, and non-compete clause issues.

1)     Employment Status:  Are doctors at-will employees?

Many physician employment agreements include provisions that provide special benefits and payments to the physician if he or she is let go without “cause.”  Agreements often also include a notice provision that requires the employer to provide the physician with written notice i.e. a certain number of days (usually 30-90) prior to discharge.   These notice provisions help ensure that patients receive notification of a doctor’s transition and allow the physician to secure appropriate malpractice insurance during the transition period.

2)     Medical Leave: What rights do I have if I get sick or disabled?

Although doctors are continuously concerned with the health of their patients, they sometimes forget about their own health and what will happen to them if they get sick.  Physicians, like all Americans, sometimes have to go out on medical leave.   Depending on the size of your employer, you may be eligible for maternity/paternity leave, including paid family leave.   Given the unique obligations physicians have to their patients, it is often important to work into the physician agreement a provision that provides for medical leave so that you can take leave while at the same time ensuring that you do not abandon your patients, and that your job is there for you upon your return.

Sometimes employers resist reinstating employees upon their return from medical or disability leave.  Under both state and federal law, however, an employer must restore the employee to the same or a comparable position unless the employer can establish that the employee would not otherwise have been employed at the time of the reinstatement.  29 C.F.R. § 825.216; Cal. Code Regs. Tit. 2, § 7297.2 (a)(c).  The burden of proof rests on the employer to show that the employer has a legitimate reason to deny reinstatement.  Sanders v. City of Newport, 657 F.3d 772, 780 (9th Cir. 2011). An employer’s refusal to reinstate an employee physician to his or her original or equivalent position after his or her leave violates state and federal leave laws unless the employer can show that it failed to reinstate the physician for reasons entirely unrelated to his leave.  Id. at 778.  One of RHDT’s attorneys can help you review the leave provisions of your employment agreement to ensure they are in compliance with state and federal laws and assist you in the event that issues arise when you return from leave.

3)    Doctors and Non-compete Agreements: Are they lawful? 

In California, there is a strong public policy favoring competition, and agreements that purport to limit an employee’s ability from engaging in a lawful profession may be unlawful.  Cal. Bus. & Prof. Code § 16600.  As a result, employers in California may have difficulty limiting a physician’s ability to practice within a particular geographic region following the termination of his or her employment—provisions that are common in many states.   Id. 

Doctors in practice group partnerships, however, may not have these same California law protections.  Under California law, partners may lawfully agree to restrictions on where a doctor may practice when he or she leaves the partnership.  See California BPC 16602 (in cases of a dissolution of the partnership or disassociation of the partner from the partnership, a partner may agree that “he or she will not carry on a similar business within a specified geographic area where the partnership business has been transacted, so long as any other member of the partnership, or any person deriving title to the business or its goodwill from any such other member of the partnership, carries on a like business therein.”).  In one such case, S. Bay Radiology Med. Associates v. Asher, 220 Cal. App. 3d 1074, 1081 (Cal. Ct. App. 1990), the California Court of Appeal specifically enforced a non-compete agreement in the case of a radiology partner whose partnership dissolved.  220 Cal. App. 3d 1074. This exception does not mean that all noncompetes in partnership agreements are lawful, or that physicians must accept any noncompete obligation that a partnership tries to force upon a physician.  Instead, the restriction on their practice following their departure from the partnership should only include the “specified geographic area where the partnership business has been transacted.”  See California BPC 16602.  Physicians in California, therefore, who anticipate entering into a partnership should consult an attorney to see if the non-compete provision in their agreement complies with the territorial limitations of Section 16602.

After physicians have finished the challenging years of training, they, should take the time to negotiate and structure their physician agreements to make sure they are fair, reasonable, and contain the appropriate protections.  After all, they earned it.