Legal Decisions v. Business Decisions: What Is the Difference?
Attorney: “Doctor, we have discussed the risks and benefits of your proposed employment contract in terms of the legal issues. For example, the geographic scope of your restrictive covenant is huge and not predictable. When your contract ends, you will not be able to practice in a large and unpredictable radius. That is legal risk. We asked your potential new employer to change this and he will not.”
Doctor: “But I really want the job! The compensation is great and I want to live in that wonderful climate. What should I do?”
Attorney: “You will need to make a business decision, being aware of the legal risks we’ve outlined.”
Doctor: “What does that mean?”
After providing analysis and advice to our clients based upon the facts we have been presented, we are often asked this question: “So now I know the legal risks, but what should I do? Make the deal or not?” Although this is a reasonable question, those seeking legal advice should be reminded that the lawyer will not, and should not, make business decisions for their clients. Why is the decision about how to proceed after receiving legal advice a business decision? It is because every decision in every industry requires the weighing of both legal and non-legal potential consequences.
Legal advice may, as an example, be related to what terms should be included in a contract to assure its legal enforceability, or to the form of business organization a client should consider when starting a new business, or, as in the example above, the practice restrictions that will apply to the doctor at the end of the contract. The legal risk in that case would be that if the contract is not renewed after the initial term, the doctor will have to comply with the restrictions and not practice within a large distance of the employer, or risk being sued for breach of contract. An attorney can reasonably assess and advise you about your chances of succeeding in that legal case. However, non-legal and business factors may tip the decision in one direction or the other. The employee doctor may have a family who has established itself in the area, and the doctor may want the certainty of knowing he/she can always practice there without restriction, leading the doctor to make a business decision to take no risk and turn down the employment. On the other hand, another doctor starting out in practice may make a business decision to take the job and get as much experience as possible, knowing there is a risk that he/she may have to work in a different area when the contract expires. The legal risk is the same in each example, but the business priorities result in different conclusions.
When weighing legal and business decisions, it is always appropriate to engage in a cost/benefit analysis. This should include consideration as to the cost of taking a certain action in relation to what the client may gain, even if the action is legally successful. For instance, a client may choose to litigate a breach of contract where the facts are clearly on the client’s side (i.e., legal risk is probably minimal), only to find out at the end that, even though the client wins in court, the financial and time expense may have made the exercise not worth the effort.
One factor that should never enter into a business decision is the risk of “getting caught” when the decision is likely to violate a law, rule, or regulation. This generally becomes an issue when a lawyer has given the advice that a certain action (or non-action) is more likely than not to constitute a violation of a law or contract.
Although business factors are an important part of any transaction, assessment of legal risk is a critical first step in making an informed decision. The attorneys at Malecki Brooks Ford Law Group, LLC are ready to provide thoughtful legal analysis to assist health care providers in all facets of practice.
For further information please contact us.