General Information

Some physicians may desire to earn a little extra money by working a second job outside of normal business hours of their current employer.  These physicians who are not scheduled to the work at the clinic on a weekend and are not otherwise on call may desire to pick up a locum tenens job or work PRN.  After all, who can’t use a little extra money?  The problem is that physician employment contracts often contain provisions that prohibit the ability of a physician to “moonlight” even during the physician’s time off.

A “no moonlighting” provision may look like the following:

“Physician shall work exclusively for the benefit of the Group. During the term of employment, Physician may not engage in any professional activities or obtain employment with any other entity, organization, or individual or otherwise engage in the private practice of medicine without the express written approval of the Group.  Any compensation received by Physician because of such activities or employment that was not approved by the Group shall be assigned to the Group and shall be deemed the property of the Group.”

Did you notice that the Group has the right to receive any monies earned by a physician for moonlighting activities not approved by the Group?  This concept is in place to incentivize a physician to not pursue the activity without approval from the employer.

Why do employers include these provisions in their contracts with physicians?  Because they want their physicians to spend their undivided attention in the furtherance of the business of the employer.  They want physicians to be fully committed to the employer’s practice. Employers also want to avoid divided loyalties and any potential conflict of interest by having a physician serve two employers.

That said, employers sometimes offer limited moonlighting opportunities for benevolent and charitable purposes, teaching, speaking, research and writing, and other similar “not for profit” activities provided these activities are approved in advance by the employer and do not materially interfere with the duties of the physician under the contract with the employer. Further, an employer may even request a physician to obtain their own malpractice policy to cover the activity if it is a medically related professional activity.

If it is important for you to be able to moonlight to earn extra money, then you should ask your potential employer to add an exception to the “no moonlighting” provision of your employment agreement before you sign it.  It is possible an employer may allow you to perform limited “for profit” moonlighting activities, but they will ask you to (i) name the other employer, (ii) limit the amount of time you spend there, and (iii) obtain your own malpractice policy to cover your professional activities in that employment situation.

Keep in mind that your employment agreement may likely contain a non-compete provision which would prohibit you from providing your professional medical services to a competitor both during the term of your employment and afterwards.  So, your moonlighting activity must also comply with your non-compete obligations or else you risk violating your non-compete obligation to your employer.

An ideal time to ask for the exception would be before you sign the contract and not afterward. You lose leverage after the signing of the contract.  After all, why would the employer agree to this exception after you signed the contract?  So, it may be in your interest to ask for this exception before signing and as part of your overall negotiations with your potential employer. If you have already signed your contract, just realize your employer may be less likely to amend your contract to allow for the moonlighting activity without receiving something in return from the physician.

If a physician proceeds with pursuing any moonlighting despite the presence of a no moonlighting provision in their contract, then an employer may claim a breach of the contract and ask a court to enjoin (stop) the physician from working the second job.

The Physician Contract Lawyer can review your current contract to identify whether you are prohibited from performing any moonlighting activities.  Additionally, the Physician Contract Lawyer can propose suggested revisions to the applicable provisions to allow you more flexibility in any moonlighting pursuits you may have.  The Physician Contract Lawyer can then negotiate these provisions with your employer to a form that is agreeable to both parties.  You will then know whether you are permitted to make extra money on the side or are “locked in” to working exclusively for your employer.

You just signed your employment agreement and are excited to know that you were offered a generous sign on bonus that will be paid to you shortly.  Now you are thinking it is time to reward yourself for completing the interview process, negotiating a fair package, and signing your employment agreement.  You are thinking about going on an exotic vacation, buying a car, or maybe even putting a down payment on a new home.

But before you spend your sign on bonus – carefully read the details your contract!

Often, there are strings attached to the payment of your bonus.  It is customary for employers to incentivize new employees to remain employed for an initial term of employment of, for example, two years. They require the pay back of the bonus if the employee does not remain employed for duration of the initial term.  To illustrate, if an employee is no longer employed after an initial term of two years, the contract may state that the employee is required repay that bonus in its entirety.  This payback obligation is called a “clawback”, and the employee must repay that amount within a certain number of days after the employee’s departure.

So, you may want to keep that sign on bonus in your bank account until you remain employed for the initial term, or else remember to save money later to pay that clawback if you intend on leaving before the end of the initial term.

Is there anything you can do to avoid paying the clawback?  Not after the contract is signed.  So, your best strategy is to address it while you are negotiating your contract and before you sign it.  Some negotiation strategies include the following:

1. Ask that the clawback language be deleted in its entirety. This is a very aggressive request but can be worthwhile if the employer agrees to it.
2. Ask that you only be required to pay a pro rata portion of the clawback. For example, if your initial term of employment is for two years and you leave after one year, then ask that you only be required to pay 50% of the clawback.  This is a more reasonable request to make to the employer.
3. Ask that you only be required to pay the clawback if you are terminated with cause or if you terminate without cause. If you terminate without cause, then your employment termination was within your control so arguably, you should be obligated to pay the clawback.  But, if you were terminated by the employer without cause, then your employment termination was outside your control and thus, you shouldn’t be obligated to pay the clawback in this circumstance.  Similarly, if you terminate your contract for cause then you did so because the employer breached the contract and therefore, you shouldn’t be required to pay the clawback if they committed misconduct.  And if your employer terminated you with cause, it would be difficult for you to argue you shouldn’t be required to pay the clawback where your termination was the result of your own misconduct.

Note that clawbacks are sometimes also present in relocation expense reimbursements that an employer may offer you.  For example, if your employer reimbursed you for relocating you from a different area of the country, then the employer may require you to pay that reimbursement amount back upon your cessation of employment within the initial term.

The Physician Contract Lawyer will review your current contract to determine if your sign on bonus or relocation reimbursement contains a clawback, and can then propose suggested revisions to the provisions to make them more physician-friendly.  The Physician Contract Lawyer can then negotiate these provisions with your employer to a form that is agreeable to both parties.  You will then have more clarity as to whether you want to in fact spend your sign on bonus on a vacation or buy that new car.

As many as seventy percent (70%) of all physicians change jobs within their first two years.[i]  New job opportunities arise which may cause a physician to early terminate his or her employment contract. For this reason, it makes sense for a physician to review his or her contract to formulate their exit strategy before they sign it. There are several provisions in a contract that are applicable:

1. Notice of Termination. Often, contracts require a physician to provide prior written notice to their employer of their desire to terminate their contract.  Such notice must usually be provided a specific number of days before termination can become effective.  Failure to follow the notice requirements can result in an inadequate termination.
2. Malpractice Insurance. Some contracts require a physician to purchase their own “tail insurance”[ii] upon departure, especially for physicians who terminate the contract unilaterally.  Such insurance policies typically cost 1.5 times to 3.5 times the annual malpractice premiums.
3. Non-Compete. Non-compete provisions are generally enforceable in almost all states. Physicians should review this provision to determine its geographical reach and duration.  A new employer may want to confirm that a physician’s non-compete will not affect his or her ability to work with the employer.
4. Non-Solicit. Non-solicit provisions are also generally enforceable in almost all states.  Physicians should review this provision to determine his or her prohibited conduct.  For example, a physician may not be able to solicit former patients, employees and/or referral sources.
5. Confidentiality.  During a physician’s employment, he or she may have learned the “secret sauce” that makes the medical practice successful.  A confidentiality clause would require a physician to not disclose, among other things, the secret sauce to third parties or use that secret sauce in the physician’s next employment opportunity. A confidentiality clause may also prevent a physician in some jurisdictions from obtaining a patient list from the employer.
6. Liquidated Damages. Some contracts contain a provision that require a physician to pay the employer a certain dollar amount for a physician’s breach of the contract. A breach would be deemed to have occurred if, for example, the physician did not complete the mandatory term of his or her contract, violated the non-compete/non-solicit, violated the confidentiality clause or failed to provide sufficient advance notice of termination.

The Physician Contract Lawyer will review your current contract and then propose suggested revisions to the above provisions to make them more physician-friendly.  The Physician Contract Lawyer can then negotiate these provisions with your employer to a form that is agreeable to both parties.  You will then be able to sign the contract and have more confidence to explore job opportunities when and if they arise.

If you have already signed your contract and are looking to exit, the Physician Contract Lawyer can review the pertinent provisions and discuss their consequences to you.  The Physician Contract Lawyer can suggest ways for you to accomplish your employment objectives but yet abide by these provisions.  The Physician Contract Lawyer has experience in helping physicians navigate through both congenial and unpleasant employment situations.  It is never too late to seek professional help.

[i] Gesensway, Deborah (October 2011). The impact of the “starter job” syndrome. Today’s Hospitalist.

[ii] This type of policy is offered by the employer’s current malpractice insurance carrier or a new insurance carrier which allows a departing physician to ensure against claims or incidents alleging medical negligence that occurred while a claims-made coverage was in effect—when such claims are asserted after the expiration or cancellation of that policy.

Interviewing can be a grueling process.  After a physician’s curriculum vitae (CV) and cover letter got him or her the interview, a physician’s remarkable performance at the interview may result in favorable feedback from the employer.  The employer may be so impressed with the physician that the employer starts talking about a job offer right after the interview.  Physicians should not be surprised if the employer turns the table around, and starts selling the physician on the medical practice and why he or she should accept their job offer!

Employers commonly provide job offers to physicians in the form of a cover letter and accompanying contract.  The physician should carefully review what the employer offers and determine if he or she is satisfied with its terms. After the contract is more closely scrutinized and negotiated, it becomes time for the contract to be executed.  But a physician should wait!  Before a contract is signed, a physician should observe the following tips:

1. Final Execution Version. A physician should ensure that the version of the contract he or she is requested to sign is in fact the last negotiated version of the contract. What is legally effective is the contract that is signed, not the contract that was supposed to be signed. Physicians can avoid this common error by proof reading the final execution version prior to execution to ascertain it contains the last set of negotiated revisions.
2. Fill In All Blanks. The contract should have all blanks completed before it is signed. More than likely the blank relates to a significant term (such as the starting date of employment), so a physician should ensure that these blanks are completed to avoid any future disagreement with the employer over that omitted item.
3. Include All Documents Referenced In The Contract. Often, contracts make references to exhibits, schedules, and addenda which are often incorporated into the contract. A physician should ensure that these valuable sections of the contract are completed and attached to the contract itself before execution. Otherwise, there could be disagreement with the employer about what information these exhibits, schedules, and addenda “should” have contained. An example would be an exhibit that lists the office locations of the medical practice where a physician would be required to work.
4. Obtain All Documents Referenced In The Contract. Along the same lines, a contract may refer to documents pertaining to employment that are not necessarily attached to the contract. For example, the contract may reference the practice’s employee handbook which the physician is required to read and follow. A physician should request a copy of such handbook for his or her records and so that the physician can also read and understand its requirements prior to execution of the contract.
5. Sign Only if You Agree to be Bound. Once a contract is executed by both parties, it becomes a legal document enforceable by the other party. Unless specified otherwise in the contract, the contract is effective immediately upon signing and it is extremely difficult to later prove that the contract is not enforceable. A physician should sign the contract only if he or she is prepared to comply with all of its terms. The physician should assume that every term will be enforceable against him or her.
6. Obtain a Final Executed Copy of the Contract. A physician should obtain a copy of the contract signed by all parties prior to his or her first day of work. Draft copies are not legally sufficient. Nor are copies only signed by the physician. A contract must be signed by all parties to the contract in order for it to be enforceable. The Physician Contract Lawyer has seen situations where certain provisions were mysteriously added or deleted from the “final” execution version of the contract years later which led to disagreement between the employer and physician.

By following the above tips, a physician can avoid future disagreement with his or her employer and give the physician peace of mind when commencing new employment. The Physician Contract Lawyer helps physicians to review their contract to ascertain that it is a true and correct copy, is complete, and represents the entire agreement of the parties.