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Resident Forum
April 8, 1998

Employment Contracts: What Residents Need to Know

Author Affiliations

Prepared by Ashish Bajaj, Department of Resident Physician Services, and Janice Robertson, Department of Young Physician Services, American Medical Association.

JAMA. 1998;279(14):1138D. doi:10.1001/jama.279.14.1138

As residents and fellows finish their programs and begin to seek employment, many of them will be negotiating contracts. When signing an employment contract, the physician agrees to all its terms. The law does not protect the physician from unsatisfactory contracts. The American Medical Association-Young Physicians Section (AMA-YPS) reviewed physician contracting experiences and prepared the monograph Contracts: What You Need to Know, a guide providing basic contract information. The following information is excerpted from the guide.

Contract Basics
Contract Basics

  • Investigate the financial standing of the contractor.

  • Be prepared to negotiate the terms of your contract.

  • Always have an attorney review the contract. For legal referrals, AMA members can contact AMA Solutions, Inc (800) 366-6968, a national network of legal and business advisors.

  • Obtain an explanation for anything in the contract that you do not understand and revise the contract accordingly.

  • Avoid provisions that allow the contractor to change rules, policies, and procedures that you are required to follow without formally reviewing the changes with you.

  • Make all exhibits, attachments, and documents referred to in the contract a part of the contract.

  • Avoid verbal understandings. All agreements should be stated in writing.

Contract Basics

Most disputes between physicians and employers that result in termination of employment are not related to medical competence. Usually physicians claim that employers failed to inform them about or misrepresented working conditions, on-call responsibilities, patient workload, potential for partnership, or prospects for increased competition. To avoid such problems:

Contract Basics

  • Discuss on-call obligations and the number of patients you are expected to see daily.

  • Try to build a cost-of-living increase into any multiyear contract.

  • Make sure the contract pays for professional liability insurance. Find out who provides the insurance, who pays the premiums, and whether tail coverage (coverage for claims made after leaving the place of employment) is included.

  • Be specific about duties. Do not accept wording such as "to undertake such responsibilities as the Board of Directors may assign."

  • The restrictive covenant or covenants not to compete provision means that you will not compete with your contract party for a reasonable period of time after the contract terminates, either voluntarily or involuntarily. This law may differ from state to state and usually applies to a period of time and a geographic area.

  • Ask whether you can obtain copies of patient records if you should leave the place of employment. Provide for access to records in case you are sued; ensure that on patients' written authorization you will be provided with a copy of the records.

  • Suggest using a mandatory arbitration clause in the employment contract. This requires any dispute to be resolved through arbitration (a nonjudicial proceeding using an independent, objective third party) rather than a court of law. Specify either binding arbitration, in which 2 parties agree that the results of the arbitration will be binding and both parties forfeit their rights to pursue the dispute further through the courts, or nonbinding arbitration, in which 2 parties may subsequently choose to seek legal redress after going through arbitration proceedings. Nonbinding arbitration is used to air parties' complaints and to determine a possible judicial resolution of those complaints.

Contract Basics

AMA members can obtain a copy of "Contracts: What You Need to Know" from the AMA Department of Young Physician Services, (312) 464-4978.