Seeking a good position, researching perspective employers, participating in interviews, and negotiating an agreement can be tedious, time-consuming work! And the reality is that most employers are going to offer a standard agreement, with a salary range that will probably be well within industry norms and internally consistent. Why bother with all of the meticulous review, contentious negotiation, and costly legal review? Here are a few examples of problems that can result from less than optimal employment agreements (names have been changed to protect the innocent).
Onerous Restrictive Covenants
Three imaginary physicians, Moe, Larry and Curly, all worked under agreements with a large hospital system, located in a semi-rural area with one major competing system. Each of them were NOT asked to renew their agreements at the end of their terms for various reasons. And each of hem had a slightly different non-compete clause in their agreements.
Curly had a two-year, 20-mile restriction following his termination. So, he had to look outside a 20 mile radius for a new position. Unfortunately, the closest employer outside the 20 mile radius for his specialty was more that a 50 minute drive from his home. Since he was required to be on call he would most likely need to move closer to the new system.
Larry had negotiated a slightly better agreement. His restriction was also for two years, but the radius was only 10 miles. There were several potential practice opportunities just beyond the 10 mile radius that Larry was able to select from, although he would need to build a new practice from scratch. But he would not face the task of uprooting his family, changing schools for his children and selling his home.
Moe probably fared the best. He had negotiated a one year restriction with a 20 mile radius. Because he was able to commute to a temporary job for year without moving and maintain his income at a reasonable level, he was later able to start a new practice near his home and eventually attract a large percentage of his previous patients to his new location.
Dr. Hardy began her first practice the September following the conclusion of her residency in June. She liked the practice and it grew reasonably well, to the point that she was on track to achieve a productivity bonus at the end of her third full calendar year in practice. But as her agreement neared the end of its third year in August, she found a position with better overall pay and additional opportunities for professional growth and teaching, which she wanted to pursue. Had she left after December 31, she would have received an RVU based bonus of several thousand dollars. But because her agreement stipulated that the physician must be employed at the time of the bonus calculation and pay-out (end of each calendar year), she was forced to forgo the bonus.
Dr. Laurel also had an RVU-based bonus built into his contract, which pays an amount per RVU once a threshold of RVUs is met during the calendar year. However, he found it to be significantly lower than he expected. Many of the RVUs he generated during the year did not meet the contractually agreed upon “RVUs for face to face visits only”.
Collaborate with Whom?
A new internist entered a busy practice after one of the senior partners retired, so she was pretty busy. The multi-specialty group had good results using physician assistants and nurse practitioners working with surgeons to enable them to increase clinic throughput and surgical case volumes. So, as the internal medicine patient volume increased, rather that hire additional physicians, it was agreed that NPPs (non-physician practitioners) would be added to the practice. Everyone agreed this was a reasonable strategy. However, after about a year, following the addition of two NPPs, the internists were becoming increasingly unhappy with the arrangement. Some of the issues causing their discontent included the following:
- One of the NPPs was a recent graduate and required extensive supervision and on-the-job training;
- Rather than increasing the internists’ productivity, the RVUs of the internists were slipping because of patients being shifted to the NPPs and because direct supervision of new NPPs kept the internists from keeping up with their old schedules;
- Physicians were seeing an increase in phone calls during off hours, which was having a negative impact on their quality of life at home.
As a result, unlike the surgeons, whose quality of life and productivity were enhanced by working with the NPPs, the internists were experiencing more work with lower productivity and smaller RVU-based bonuses.
All of these issues were exacerbated by the fact that the employment agreements were completely silent on the issues of training, supervision and collaboration with NPPs.
An Early Birthday Present
Negotiating a three to five-year employment agreement can be like negotiating the purchase of new car. You can become so focused on the big item (salary or final price of the car) that the little things can be overlooked (payment of moving expenses and signing bonus or cost of an unwanted accessory and extended warranty on a car). It is common for car salesmen to successfully convince buyers to buy unneeded or costly add-ons because they seem trivial in comparison to the cost of the vehicle. You can use this same tactic to get an extra $3-, $5- or even $10,000.
Bill was looking to join a hospital group as a hospitalist. The hospital was already offering a generous compensation package, with good salary, matching on his 403(b), and excellent insurance coverage. He made his decision to take this job early in the recruiting season and he used this to his advantage. He convinced his new employer to enhance his signing bonus since he was signing so early. So rather than getting 1/2 of a $20,000 bonus on signing and 1/2 after his first week of work, he received an early signing payment of $10,000, another $10,000 when he moved to town and another $10,000 after he started working. What would you do with an extra $10,000 in your pocket?
These are just a few examples that illustrate why it is important to fully understand the nuances of negotiating an employment agreement and why you should engage a skilled attorney to help you in the process to avoid income loss and unforeseen legal headaches.