How Far Should I Push to Negotiate My Employment Agreement?
“Don’t bargain yourself down before you get to the table.”
– Carol Frohlinger
Our physician clients who are in the midst of employment contract negotiations frequently ask: “How far should I push to get what I want? If I push too hard will the employer back out of the offer?”
Very rarely will an employer back out of an offer if demands are well thought out and reasonably justified by legal and business reasons. In fact, it is a good message to send to a potential employer that you have thought through the issues in your contract and are asking questions to clarify expectations for BOTH parties. Your clarifications benefit both you AND the employer because they help create a clear meeting of the minds.
Five significant points of negotiation in an employment agreement generally are: 1) compensation; 2) termination provisions; 3) tail insurance; 4) work locations; 4) noncompete clauses; 5) notice of breach and opportunity to correct. This is not an exhaustive list but usually the biggest points of concern.
Here are some recommendations about these significant areas of contract negotiations:
1. Compensation
Have an idea of the market compensation in your specialty and region. You can find these comparable numbers through your professional association, MGMA and Sullivan Cotter. Your training program or your attorney may have access to compensation data. Keep in mind that compensation data, such as MGMA, is only one guideline used by employers, but it does not hurt to have an idea of the numbers.
2. Termination Provisions
A contract has a “Term.” The Term represents the length of the contract. For example, the Term of a contract could be two years with an automatic renewal. That sounds like it will continue happily ever after. However, this is misleading because the Term is NOT the same as a Termination provision. Although a contract may have an indefinite Term, most contracts have an EARLY TERMINATION PROVISION which allows either party to terminate at any time upon a specific amount of notice. The notice period varies but is frequently 60 or 90 days, which gives the employee the technical equivalent of a 60- or 90-day contract. NOTE: Contracts that are for “employment at will” (not the industry standard for physicians) do not require any notice period to terminate. This is high risk for the employee but not illegal. Under an “at-will” contract you can be terminated at any time upon “notice” with no payment after the termination. Contrast this with a required notice period when you would have to work but would still be paid for a certain number of days if you are asked not to work. This is critical for a physician who must look for another job and get credentialled for the next job. We prefer at least 60 days’ notice for termination without cause unless there is a compelling reason.
3. Tail Insurance
Tail insurance is an insurance product that covers claims that have been incurred but are not yet known. It is needed when the underlying professional (malpractice) liability insurance is issued on a “claims made” as opposed to “occurrence” basis. The one-time cost of tail insurance is generally about 200 per cent of the annual premium and varies due to specialty and jurisdiction. This can be a large cash liability if not negotiated properly. The goal is to have the employer pay for tail insurance when the contract has expired or terminated. Do not try to vet this yourself. It is a complex issue and requires knowledge of insurance coverage.
4. Work Locations
If you have it in mind that you are going to work in one location and that is your desire, look closely at the language related to work locations. Often there is language added that states you can be moved to other locations at the sole discretion of the employer. A way to soften that language is to say that other locations are as “mutually agreed upon.”
5. Noncompete Clauses
We are waiting for the final FTC Rule to become effective which would eliminate noncompete restrictions for nonprofit organizations. We will keep you posted. In the meantime, we negotiate noncompete clauses to be as predictable and as minimally restrictive as possible, with a release if the employee is terminated without cause.
6. Notice of Breach and Opportunity to Correct
Reasons that an employer can terminate an employment contract immediately for breach or “for CAUSE” can be vague and subjective. For example, rising in frequency now is the reference to “unprofessional conduct” or “not getting along with others” which can be subjective. Preferably, an employer should notify the employee of a problem and give the employee an opportunity to correct the problem. Without this opportunity to correct, the employee can be terminated upon notice. This is, arguably, an easy way to eliminate someone who is not “well liked” for subjective reasons.
See also:
For further information contact:
Aileen Brooks [email protected]
Melinda Malecki [email protected]