Doctor Employment Lawyer Blog

Chicago area hospitals seem to be moving further and further away from imposing broad non-competes on physicians. And, the Illinois supreme court's December 1, 2011 ruling in Reliable Fire Equipment v. Arredondo, may reinforce that trend.

Reliable Fire Equipment overturned the Illinois appellate court ruling in Sunbelt Rentals, Inc. v. Ehlers, which eliminated consideration of whether an employer has a legitimate business interest in determining whether to enforce a restrictive covenant, and returned to Illinois' tradition of applying a three pronged rule of reasonableness test. The test asks the following: (a) is the restriction no greater than what is required to protect the legitimate business interest of the employer; (b) does the restriction impose undue hardship on the employee; and (c) is the restriction injurious to the public.

Although the court also held that a flexible "totality of the circumstances" approach must be used to determine whether an employer has a business interest deserving of restrictive covenant protection, the ruling confirms that employers need more than just reasonable restrictions to have an enforceable non-compete.

For doctors in Chicago, where patients might visit a number of different hospitals and/or practice groups for different conditions, it will be interesting to see what protectable interests are put forth. Although a physician practice group might be able to demonstrate a protectable interest in preventing a partner from competing, it seems that restricting a non-partner physician from securing new employment might be more difficult.

At the same time, the rule imposed by the court in Reliable Fire Equipment is flexible enough where almost anything can still happen in the area of noncompetes in Illinois. As we always tell clients, "it's not whether the employment agreement you are about to sign is enforceable that is important, but rather you want to sign an agreement that might costs tens or hundreds of thousands to litigate." Despite the Illinois supreme court's decision in Reliable Fire Equipment, the same rule applies. Think twice before you sign a non-compete.

By: Poonam Khatri & Kristen Prinz

Moonlighting among physicians is growing in popularity. Often physicians, particularly residents and fellows, moonlight for extra income, especially those looking to pay off the massive debts from medical school. More experienced physicians also look to moonlighting for exposure to different practice areas, to keep their clinical skills sharp, or to improve their standing within the community.

Physicians looking to moonlight may choose from clinical or non-clinical opportunities. We have seen physicians obtain positions through billing companies, medical device providers, insurance companies, or on their own as expert witness consultants.

Moonlighting can be a great opportunity, but there are a number of important legal issues that a physician must consider before accepting a moonlighting position:

Part 1: Negotiate for moonlighting.

If you know you will need to moonlight to cover your expenses or, even if you just want to moonlight, negotiate this term on your way in. Most physician employment agreements do not allow moonlighting. Those that do, only allow it in certain limited circumstances.

Some employers have gone even further. They allow you to moonlight, but all income goes to the employer. Make sure you ask for exactly what you need: a way to make some extra money.

Ask questions before you agree to accept a position. Make sure you understand your obligations and the employer's requirements relating to moonlighting.

Part 2: If you didn't negotiate, read your agreement before seeking out any side work. Additional provisions may be at play.

Be sure to review your employment contract closely before accepting a moonlighting position. As explained above, many employers prohibit moonlighting altogether, claim ownership over income derived from moonlighting, or have an arduous process for getting moonlighting approval.

If your contract does allow moonlighting, other provisions in the agreement may put such income at risk. For example, a contract with the clause "While employed by Employer, any remuneration generated by Employee shall be solely that of Employer" can include not only income earned through outside sources, but also non-cash benefits. We assume you do not plan to work extra hours just so your employer can have some extra income. Make sure you are not defeating the purpose of moonlighting and read your employment agreement.

Non-compete clauses can also affect your ability to moonlight. Contracts will generally set out specific limitations of your non-compete, but they may not specify specialty practice restrictions. Don't be afraid to ask for clarification!

Your employer's policies and procedures for moonlighting approval can include anything from a simple written request, to a lengthy board approval process. However, failing to follow those policies can be considered a breach of your employment agreement. Abiding by the policies is the only way to protect your current employment while seeking approval for other opportunities.

To be continued.
PARTS 3 and 4, next week.

The majority of doctor employment contracts that we see today offer some type of productivity based compensation. In addition to caring for patients, most physicians must also be marketers and business people.

Specialty practitioners in particular must cultivate professional relationships and become known to referral sources. Common sense would indicate that your relationships belong to you. However, if you are using your employer's time, equipment, letterhead, and supplies in developing those connections, the relationships belong to your employer.

I point this out because doctors, like most professionals, maintain all of their contacts in their office and on their work computer. If you are ever fired, and walked out the door, your contacts are left behind.

Of course, relationships really are personal. And, I am sure you can seek out your referral sources and reestablish the contact. However, it takes years to compile an address book. Then, in an instant, it's gone.

A best practice to put in place immediately is to keep a personal log of all your contacts at home. If you make this an ongoing practice, you will always have access to your address book, regardless of whether you can access your office.

I used to think that the word "equitable" means equal or fair. Merriam Webster would certainly have us believe that to be true. Yet, when I see variations of the word in physician employment agreements, I'm a bit wary. Especially when the word is connected to a discussion regarding call coverage.

Physicians who are required to take call know that weekends, holidays and family time in general can be eaten up by the days and hours on call. What does it mean if your agreement says that "call will be determined on an equitable basis, as determined by employer"? Equitable may mean that each physician is given an equal number of days of coverage, but your days are all the major holidays. Or, equitable may mean that new physicians get the bulk of call coverage because senior physicians have paid their dues. Or, it may mean that you are excluded from call altogether.

"Equitable" may very well mean fair, but meaning and application are not always the same. In negotiating your employment contract, the question should not be "is equitable fair?" but rather "is equitable fair to me?"

I have seen a number of Physician Employment Agreements recently that determine compensation based on productivity. This can be very lucrative for a physician who is able to market his/her services or has already developed a large patient base. However, a doctor who joins a practice directly out of residency will face a number of difficulties in building a practice. This is especially true if the Employment Agreement does not identify marketing and promotion tools and support that will be provided by the practice.

What makes these compensation terms especially treacherous for new physicians is that the practice groups that most often use this form of compensation are also the practice groups that do not pay for the physicians' tail coverage.

If you end up taking a position and patient volume is low or collectibles are low and you need to leave because you are not making any money, you could also be required to pay large amounts of money to obtain tail coverage.

Taking your first job out of residency should not dig you into a deeper hole of debt, but if you are not careful it can. This is why I always try to remind physicians that, regardless of whether they hire an attorney, they must make sure they understand the terms of an Agreement before their signature goes on the page.

Instead of providing a sign-on bonus, many physician employers now use forgivable loans as means of compensating a new employee. This allows the employer to pay a sign-on bonus without the risk of losing that money if the physician leaves before the required time period. Typically this type of compensation is structured as a loan that the physician can elect to take when she/he starts the position with the employer. The loan will accrue interest over a specified time frame, such as two to five years. If the physician stays with the employer for the required period of time, the loan will be forgiven. If the physician leaves or is terminated for any reason whatsoever, the loan and all accrued interest will be immediately due and owing.

Because the loan is option that the physician can elect to take or decline, the terms of the loan are usually difficult to negotiate. The risk to the physician lies in the fact that she/he can would for the employer without ever intending to leave and then be fired right before the loan is forgiven. In such situations, the employer has the right to demand immediate payment of the principal and interest due on the loan.

This is why understanding the culture of your new employer is so valuable. While you can't possibly know everything about an employer before you start, there are a number of ways you can get insight into an employer's culture. And, even if you are not receiving a sizable forgivable loan, knowing your employer before you start working is invaluable.

There are certain job requirements and considerations that only a physician might need to contemplate. For example, no other profession ever has to worry about getting hospital privileges or ensuring call coverage or completing CME courses. And for those physicians that do have to worry about those things, it is assumed that their employer will support them.

However, I have repeatedly seen physicians sign a employment agreements that are silent as to the level of support the employer will provide. This provides the employers with an opportunity to terminate you for breach of contract if you are unable to meet your obligations without their support. Since most doctor employment contracts have notice periods, terminating the physician for "cause" can save the employer a substantial sum of money.

Even if your employer orally promises you a certain level of support, that promise may not be enforceable depending on the written terms of your agreement. For this reason, it is imperative that you ask your employer to clearly delineate the level of support it will provide. Will it provide administrative assistance to handle the paperwork? Will call coverage be equally shared? Will it provide financial support for CME courses?

Asking these questions at the start of your employment can establish the trust necessary to create a long term relationship.

Congratulations to all of you who have just completed your residency. Most of you have already signed your employment contract and are preparing to take on your new role as an attending. I hope that you asked for everything you want in your employment arrangement and that your employer gave you what you want in a clear manner.

Just make sure you read your agreement and enjoy what you do.

It is the time of year when physicians are completing their residencies and locating new positions. And, even those that are not moving on, usually find themselves faced with an annual contract negotiation. Yet, surprisingly, most physicians do not take the time to review their agreements and fully understand their obligations.

This is especially true when the physician has been with the employer for many years and complacency has set it. Just because you didn't read the last agreement does not mean you should continue to sign everything your employer places in front of you.

If you get only one thing from this blog, get this: Read your agreement.

Most physician employment contracts allow either party to terminate the agreement at any time by giving a certain amount of written notice. The notice period is typically 90 or 180 days. However, many physicians do not understand that the notice period is not a guarantee that he or she can work through that period.

I recently spoke with a physician who was shocked when her employer exercised the 90 day notice period by providing written notice and asking her to immediately leave the practice. The physician was paid during the notice period, but no notice of her departure was provided to patients or referring doctors. She was understandably upset because her patients were left with the impression that she did not even give them the courtesy of letting them know she was leaving.

This physician had believed that the notice period was a promise that she could continue to work for her employer during the 90 day period and use that time to inform patients and referring doctors of her departure. Instead, she was discovered that, as long as she was paid through the notice period, the employer was not under any obligation to allow her to treat patients during that period. Nor was her employer required to work with her to notify patients or referring doctors of her departure.

Leaving a practice without any notice to your patients or referral relationships is likely to damage relationships that may have taken years to cultivate. Patients don't usually understand that the employer owns patient information and a doctor likely will not have access to such information after leaving a practice.

The lack of notice can be damaging to the employer as well. Patients often impute the conduct of a treating physician to the practice as a whole. Leaving a patient wondering what happened to his or her physician is not likely to create a trusting doctor-patient relationship.

Working out an agreement about how to notify patients and referring physicians regarding a physician's departure at the start of the employment relationship is beneficial to all parties. It allows the doctor and the employer to protect their reputations and minimize patient confusion. It ensures patients are informed about whom they can contact about their treatment issues. And, it ensures that referring doctors know who will be taking over the departing physician's practice.

Of course, trying to work out those details at the end of an employment relationship is usually an exercise in futility.