Whether fresh out of residency or making a lateral career move, licensed clinicians should always understand employment or shareholder agreements before signing–your career may depend on it. Although reading and understanding the entire agreement is crucial, a few items warrant special attention before putting the proverbial pen to paper.
1: Non-Compete Clauses
Non-compete clauses are a big-ticket item in employment and shareholder agreements for clinicians. They are also probably the most frequent source of lawsuits when clinicians leave a former practice. In Florida, Fla. Stat. § 542.335 governs non-compete agreements and allows them so long as they are reasonable in time, area, and line of business, and not “otherwise prohibited.”
- For employees: a court will presume the non-compete is reasonable if it is less than 6 months in duration after the end of employment, and it will presume it is unreasonable if more than 2 years in duration.
- For shareholders, the above time periods are lengthened to 3 years and 7 years, respectively.
- A special exception for physicians: in 2019, the Florida Legislature enacted Fla. Stat. § 542.336, which prohibits non-competes in counties where one entity employs all physicians in a similar specialty.
Ultimately, the practical effect of an enforceable non-compete is that the clinician often has to leave the geographic area to continue practice. Thus, signing one may mean a move will be in store if the relationship ceases.
2: Intellectual Property
The question of who has rights to intellectual property (patents, trademarks, and copyrights) developed during the employment can be a major part of the agreement if the clinician is expected to develop publications, business processes, or inventions. Parties should have an in-depth conversation and a similarly detailed agreement that sets out exactly what works will be the property of the employee or the organization and under what circumstances. “I herein assign” are the important words to bind the creator of IP to giving up their work. Often times, just because there is a choice of law provision that states the contract will be governed by Florida law, it may not apply if the IP is created elsewhere, such as states like California (e.g., in situation where work is performed remotely).
3: At-Will or Set Term?
For employee clinicians, the mere fact that an employment contract exists does not guarantee employment indefinitely. If, for example, the employment agreement has a provision that employment may be terminated with 30 days’ notice, then it does not truly promise that the job will continue for any amount time. On the other hand, a contract that sets out an agreement to employ the clinician for an explicit period of time (e.g., one year subject to renewal) guarantees set employment for that year, so long as the clinician meets their other material obligations. Keep an eye out for the provisions that set the term of employment. These are usually within the first page of the agreement.
4: Attorney Fees and Costs, ADR, and Forum
Often, parties do not like to think about disputes; but, if there is one, the “what,” “how,” and “where” of resolving the disagreement suddenly becomes very important. Provisions about attorney fees and costs, alternative dispute resolution (ADR), and forum for suit all govern the logistics of how to handle claims and lawsuits. These usually occur near the end of the agreement and are, seemingly, the most boilerplate.
- ADR provisions can require that parties must mediate and/or arbitrate prior to filing suit. These are typically included to spare the costs and time of litigation in court, but they mean that, unless waived, a lawsuit can be dismissed if ADR is not completed first.
- By default, attorney fees and costs are borne by respective parties in lawsuits (known as the “American Rule”); however, many contracts have a “prevailing party” clause that states that, if a lawsuit is filed, the prevailing party (or substantially prevailing party) will be entitled to have their attorney’s fees paid by the other party. Sometimes these provisions are not mutual. Make sure that any provision for attorney fees and costs is mutual, if there is one.
- Finally, forum selection clauses set the jurisdiction where disputes are resolved. Know where the jurisdiction and venue (think about state, county, and court) where a lawsuit must be filed. Will those be convenient or agreeable places to litigate a dispute? These questions can take on added importance if the clinician is required to leave the geographic area because of a non-compete clause.
For clinical practices that accept Medicare or Medicaid payments, one of the most critical tasks when reviewing an employment or shareholder agreement is to ensure that it avoids improper compensation or incentive arrangements under the Stark and Anti-Kickback statutes and their state counterparts. At a basic level, the clinician must confirm that the agreement is written, commercially reasonable, and that it does not directly or indirectly base compensation off the volume or value of any referrals by the employed physician, with the productivity bonuses excluded. This is best done with the help of legal counsel. The OIG further warns, “it is generally recommended that all business arrangements wherein physician practices refer business to, or order services or items from, an outside entity should be on a fair market value basis.” For example, does a space lease agreement to a physician charge rent at a fair market rate when compared to other commercial (clinical and non-clinical) properties? Also, beyond the terms of the agreement, does the employer or organization have a robust program for the prevention of fraud, waste, and abuse? Keeping an eye on these issues can prevent not only civil lawsuits, but regulatory and criminal penalties.
No matter how great the opportunity, clinicians should always understand all parts of an employment or shareholder agreement before signing. This is best done with the help of legal counsel. While these pointers do not address every aspect of an employment or shareholder agreement, keeping an eye out for these provisions can help both with planning your career and with avoiding the most frequent sources of disputes from the outset. Keeping an eye out for these provisions can also better inform your discussion with your attorney and make it more efficient, saving you time and money.
Do you have questions about an agreement or another legal matter? Contact Bush Health Law for a free initial consultation .
Florida Non-Compete Statute: Fla. Stat. § 542.335
NOTE: This post is provided for general information purposes and is not, by itself, intended to create an attorney-client relationship or provide legal, accounting, or other professional advice.
Bush Health Law PLLC is a law firm that offers legal counsel to clinicians, researchers, and organizations to support the mission of quality, innovative healthcare. With offices in Gainesville, Florida, the firm serves healthcare clients throughout Florida, including Gainesville, Alachua, Jacksonville, Ocala, Lake City, Tallahassee, St. Augustine, Daytona Beach, Melbourne, Orlando, Leesburg, Lady Lake, Tampa, St. Petersburg, and Lakeland.
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