Employment Contracts Need to Ensure Physicians are Free Agents

If a physician is permitted to engage in outside activities or services, the second question is whether income generated from such activities belongs to the physician or the employer. This often is a topic of negotiation. Physician and employer frequently do not see eye to eye on this issue. Physicians, on the one hand, often view the income generated from permitted outside activities to be separate and apart from his or her services on behalf of the employer, and thus are outside the reach of the practice. This position is strengthened if the activity occurs on the physician’s own time and outside of the employer’s hours of operation. Employers, on the other hand, often view income from outside activities as part of the employment relationship with the physician. Some employers are of the belief that the physician would not have had the opportunity to participate in the outside activity but for the physician’s employment with the particular employer.

Dr. A’s employer felt that it already was conceding by allowing Dr. A to engage in outside activities and insisted that any payment received by him for these services should be remitted to the practice. Dr. A agreed to this and negotiated for the outside activity monies to be included in his collection amounts, which was a factor in calculating Dr. A’s compensation:

“All monies received by Dr. A from the Permitted Activities shall be remitted to the Practice and shall be included as employee collections in calculating Dr. A’s compensation under this Agreement.”

The last question is whether outside activities are covered by the physician’s malpractice insurance policy. If the employer provides the policy for the benefit of the physician, the employer—and the malpractice insurance carrier—may exclude activities performed by the physician outside of his or her employment with that employer. This is often an issue for physicians who want to moonlight, as moonlighting for a third party frequently is excluded from coverage. It is important that the physician consult the malpractice insurance carrier to confirm whether certain activities are covered under the policy. It may be the case that a separate policy is required to insure the physician’s outside activities, even those activities that are unpaid.

Contract clauses describing what the physician can and cannot do outside of the employment relationship are of key importance. These clauses should mirror the individual physician’s medically related and extracurricular interests, and the financial benefits of these activities—if any—should be addressed in the employment agreement. Don’t forget to check with the insurance carrier to ensure that the activity is covered by the policy, as even volunteering medical services could expose a physician. It is best to address these issues at the onset of the employer-employee relationship. That way, all parties are on the same page from the beginning.