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.

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.

You can be the greatest doctor in the world, but it means nothing if patients don't know who you are or where to find you. Medical school and residency programs provide the training necessary to treat patients, but there is very little access to the business and marketing aspects of developing a medical practice.

Many private practices are moving away from guaranteed salary structures and implementing productivity based pay plans. This means that, in addition to treating patients, doctors are expected to market and grow their practice.

Employment agreements often reflect this type of pay plan, but have little information about how the practice will assist you in attracting patients. These types of employment contracts will typically provide a short period of guaranteed pay (anywhere from 6 months to 2 years). After that period, your pay will be solely based on collections resulting from your medical services.

As with any business, it takes time for a doctor to build a reputation and patient base within the practice. Make sure you know how the practice will support you in attracting new patients. And, more importantly, make sure you understand how collections are processed within the practice. It's no longer enough to be a great physician. You have to have great support. The only way to ensure that, is to have an employment contract that provides for that support.

The contract to contract is like the meeting before the meeting. It's the initial offer whereby the big terms are agreed upon before the nitty gritty details are discussed.

Many practice groups use an initial offer letter to lock down key terms before sending a physician a proposed Employment Agreement. This allows the practice to lock in salary and certain benefits before going down the road of negotiations. However, when reviewing an offer letter, doctors should be cautious not to bind themselves to terms about which they have not really agreed.

While compensation is not always the most important item in an Employment Agreement, it is the most important item in the offer letter. This is because, by signing the offer letter, the practice typically will take the position that compensation has been determined.

Of course, your signature on an offer letter does not prohibit you from revisiting issues. Just because you signed the agreement to agree, does not mean you really have to agree. However, signing the offer letter should be the first step in a long term employment relationship. And, it's never good to start by reneging on an initial agreement.

Many physicians joining a practice want the opportunity to be an owner. And, many practice groups use future ownership as a potential benefit to physician employees. However, the terms of that future ownership interest are usually vague at best.

To some extent, an open ended, to be negotiated at a later date agreement may be beneficial to everyone. But, if your main objective in joining a practice is to be an owner, ambiguity means uncertainty. Including the minimal requirements for a buy-in will prevent you from being shocked by terms down the line.

I recently heard a story about a surgeon who accepted her first attending position without having a full understanding of her contract and the employer's expectations. It turned out that the employer expected her to take on all of the grunt work for the senior attendings. She was miserable and didn't have a lot of options given that she agreed to a non-compete and was not interested in moving.

In the excitement of finding your first job or a new job for that matter, there is often a rosy view of the future that prevents people from asking all of the questions that will affect whether the employment relationship is successful. And, while asking questions does not guarantee you will get honest answers or a realistic perspective, the answers usually provide some insight into the employer's culture.

Signing an agreement with the heading "Independent Contractor Agreement" does not make you an independent contractor. If you are terminated from a position that was labeled independent contractor but was an employment relationship in practice, you may actually be considered an employee under Illinois law (and federal law as well). Why is this this important? Because as an employee you have rights that are unavailable to independent contractors. For example, discrimination and wage laws do not apply to independent contractors. Furthermore, employees have access to unemployment benefits; independent contractors do not.

How do you know if you were really an employee? It depends. The Illinois Department of Labor, the Illinois Department of Employment Security and the IRS all have slightly different standards in determining whether you were an employee or independent contractor. The most basic question is whether you were free from direction and control of your employer.

Did you perform a job that was unrelated to the purpose of the company for which you worked? Did you make your own schedule? Did you use your own equipment and materials?

This is not an exhaustive list of the questions that the agencies will consider to determine your status, but it's a good place to start. If you were under the control of your employer and treated more like an employee than an independent business, you may be entitled to employment related benefits and your employer may be subjected to a number of penalties.