Why you should pay attention to contract boilerplate language

The last pages of your new employment contract contain a number of provisions, typically described as“boilerplate,”that no one discusses. Here’s what that fine print covers.

While some boilerplate provisions have less practice impact than others, physicians should pay attention to the substantive  provisions that potentially have practical impact for physicians signing employment contracts. 

Procedural provisions

These include sections on counterparts, waiver, entire agreement and severability. They evolved for the most part to counter the old doctrine that a defect in any way resulted in the entire contract being unenforceable. For example, the waiver provision means that should the employer waive one provision, the entire contract does not become void.

Governing law

This provision states what state law would be applied in a dispute. Typically, this provision would include the venue where the dispute would be resolved. Venue can be important. If, for example, you work in New York for a healthcare organization that’s headquartered in California, it’s probably not that significant if New York or California law applies; however, if you live in New York and get into a  dispute, you would rather have the fight close to home than have to fly to California.

Offset

This provision means that the employer could take from your paycheck any money that it believes you owe the employer. Generally, state employment laws prohibit deducting payments (other than payroll taxes, such as FICA) from an employee’s paycheck without the employee’s permission. The offset provision is that permission. This can have importance if the employment relationship doesn’t end well and the employer alleges you have caused it damages.

Assignment

This section explains whether someone else can take over the contract. Typically it says either that no one can assign the contract without the other party’s permission or the employer reserves the right to assign the contract to a successor. In the current era of mergers and acquisitions, the right of the employer to assign the contract to the company that buys it out may be important. Most contracts have termination on notice provisions that say if you don’t like your new boss, you can give notice and quit.

Arbitration clauses

An Arbitration clause prevents a party from suing in court, and requires that the dispute be heard instead by an arbitrator.  In arbitration, the parties pay for the privilege of having their case heard by someone who is not required to follow the law and from which no appeal can be taken. In my opinion, litigating in court is preferable; but employers hardly ever remove an arbitration clause. In practice, however, it is usually not a problem because most employment disputes, in my experience, are resolved without litigation.

Indemnification

This provision is not in every employment agreement, but when included typically it states that you will indemnify  the employer for any breaches or acts that result in the employer being sued or incurring damages. I am not so concerned when these provision are limited to egregious conduct, but they are worrisome if they include negligence or payer audits.

In the case of physicians, negligence means medical malpractice. By definition, the employer is vicariously liable for any malpractice committed by its employees and plaintiffs’ attorneys always sue the employer.

Practically, I have never seen an employer invoke this provision in a malpractice case, but there is always a first time. I try to revise the employment agreement to prevent this, but if the employer refuses it remains a potential risk.

Similarly, third-party payers audit and demand money back from medical practices all the time. Coding and billing are highly subjective and experts disagree frequently over proper codes. Provided you coded in good faith, the risk of audits and recoupments should be the employer’s cost of doing business, not yours.