April 16, 2021 | By Jesse Overbay, JD
No matter who you are (auditor, physician-owner, or practice administrator), independent contractor agreements and employment agreements can be a major thorn in the side for you and your organization. Many contractual agreements are simply set aside after finally being signed and are not thought about again until there is a question about pay, working hours, or termination. Often, what the agreement actually says varies greatly from what the contractor, employee, or employer thinks it says. It’s in the best interest of all parties to clearly and concisely negotiate and draft the agreement on the front end, as well as know when to review and update it.
First, are you an independent contractor or an employee? According to the Internal Revenue Service, “if you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed.”[i] You may also be considered an independent contractor if you do not receive special training, if you make your own schedule (or have control over your schedule), if you provide your own tools and equipment, and if you can contract with any company at any time. On the other hand, you are probably classified as an employee if you are trained and given instructions, if you have a set schedule, if you have an ongoing contract with a company, if you sign a non-compete agreement, and if you have insurance, worker’s compensation, and Social Security paid by the company.
Second, who should have a written employment agreement? Many times only employed providers are the ones who physically sign a formal document. However, practice administrators and managers, provider-owners, “specialty” staff such as billers/coders, auditors, specialized techs/clinicians, and independent contractors all need written employment agreements with the practice. (Talk to your practice attorney or a healthcare attorney for more information)
Additionally, if you are hiring an employee or contractor who needs an agreement, be proactive and do your research as early as possible. Owners and administrators should have access to all of the practice’s employment agreements and know the range of salaries historically offered. Do not try to interpret complicated provisions of old agreements on your own; know when to ask for help so you do not get trapped in a bad situation. When you feel like you have a grip on what your practice’s agreements typically contain, you’re ready to start negotiating.
Almost everything is negotiable, except for the items that aren’t. Healthcare employment agreements cannot limit a provider’s independent medical judgment. You cannot negotiate provisions contained in the Americans with Disabilities Act, anti-discrimination provisions, or HIPAA/HITECH requirements. Otherwise, almost everything else is up for some type of negotiation.
Key provisions in employment contracts include the following:
- Pre-conditions of employment (what needs to be satisfied before the start of actual employment)
- Description of the job and obligations – full-time versus part-time (and make sure those terms are well defined)
- Term of the agreement – specific and finite or self-perpetuating
- Termination provisions (without cause by mutual written consent or on written notice of either party with plenty of time built in)
- Termination provisions (with cause) – “good reasons” include death, extended disability, if the provider becomes or is uninsurable, criminal conviction, etc.
- Exclusivity (especially for providers, clinicians, and “specialty” staff)
- Non-compete clauses & liquidating damages provisions (an article unto itself)
- Compensation, Benefits, and Incentive/Bonus structure (for both staff and providers)
When you are working to negotiate and finalize the employment agreement, treat the other party with respect, know your priorities, and follow your strategy. If you get stuck on a certain issue (or issues), move on and return to it after most of the other bargaining is done. Most importantly, get everything agreed upon in writing. Neither side should ever rely on verbal agreements only.
Finally, when both sides are in agreement and the document is signed, do not just file it away and forget about it. Employment agreements should be updated as the practice changes. That includes updates if the description of the job changes, pay or benefits needs to be adjusted, or the practice is merging, downsizing, or being acquired.
Do not be afraid to ask for help and do not try to go it alone. Seek legal counsel or advice early and often from a reputable health law attorney. Many states and jurisdictions have specific laws or guidelines for employee agreements so do not rely on templates.
This article is intended to convey general information only and not to provide legal advice or opinions. The contents of this article should not be construed as, and should not be relied upon for, legal advice in any particular circumstance or fact situation. The information presented may not reflect the most current legal developments. No action should be taken in reliance on this article and we disclaim all liability in respect to actions taken or not taken based on any or all of the contents of this article to the fullest extent permitted by law. An attorney should be contacted for advice on specific legal issues. This article is not intended as a solicitation.
[i] Independent Contractor (Self-Employed) or Employee?, https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee