How to review a physician independent contractor agreement

Oct 8, 2018

Side jobs and non-employed part-time positions often require a physician independent contractor agreement to be signed. This article discusses the purpose of its components, how to effectively review it, and what to check for before signing.

Reviewing and negotiating a physician independent contractor agreement

I’ll touch on the most common sections and some considerations for each of them. These should be reviewed carefully before signing. Requesting adjustments to the contract is completely acceptable. You can think of it as part of negotiating an offer.

Note that this article is focused on contracts that are provided to you (the physician) by a company that is hiring you to do some work for them. In some cases – such as running your own business that offers a pre-defined service – you’d be providing them with a contract to sign. Many of the same concepts apply in that situation; however, the info presented here doesn’t go into the detail of drawing up an entire contract for your clients.

Introduction, status, and background

Contractor status

Before you sign an independent contractor agreement, be sure you will actually be an independent contractor. And make sure the written agreement makes it clear that you’re a contractor and not an employee. At the top of the document, it should say “Independent Contractor Agreement” or similar. It should not say “Employment Contract.”

The employee vs contractor differentiation is important for tax purposes, for how you carry out the responsibilities of the job, and in case there are any disagreements between you and company down the road. Check the contract to make sure it uses the correct term and doesn’t use the terms ’employee’ and ‘contractor’ interchangeably.

  • Am I clearly listed as an independent contractor?

Opening paragraph

The first paragraph of the contract states the date of the agreement and the parties involved. Check that the date is accurate and that the parties listed are correct. The “Contractor” may be you as an individual (e.g. Joe Sixpack, MD), or your small business (e.g. Sixpack Consulting, LLC). Make sure that your business name is listed if you’re doing the work through your small business.

Also check on the name of the “Company” to ensure you’re making an agreement with who you think you are. Some work is done through a third-party organization. This isn’t necessarily a problem; however, you should be aware of who your agreement is with.

  • Is the date accurate?
  • Is my name or business name (and address, if listed) correct?
  • Is the agreement with the appropriate company?

Recitals

You may see a series of introductory statements which ‘set the scene,’ so to speak, for the agreement itself. Each of these typically starts with “Whereas” and the final one starts with “Now therefore.” They aim to describe the parties’ intentions and describe the rationale for the contract. Read these and make sure you agree with them.

  • Are the recitals accurate to me and my situation?

Services, term, and compensation

Term and termination

The contract should state the date that it takes effect and indicate how and when the agreement ends. Take note of the amount of notice needed (if any) for either party to terminate the contract. This is particularly important for relationships that are ongoing and ones that will provide a significant percentage of your income.

With most contracted work, the company does not need a specific reason to terminate the contract. You don’t have the same rights as an employee who’s being let go. Broadly speaking, there are two ways to address the uncertainty that arises from this:

  • Be prepared to lose the work and the source of income at any time, or
  • Ensure there is language in the contract that prevents sudden, unexpected termination, such as a notice period.

  • When does the contract begin?
  • When and how does the contract terminate?
  • How much notice is required to terminate the contract?
  • Does the contract renew automatically?

Contractor services and duties

The Scope of Work describes what you’ll do for the company and/or what your deliverables will be. It should provide enough detail do avoid disagreement or surprises later.

All the details about your duties are often included in the body of the contract itself; however, it sometimes refers to an attachment (often called Statement of Work and marked as Exhibit A). The latter is more common when the contractor has an ongoing relationship or multiple projects with the client. A single contract may remain in effect while multiple Statements of Work are used. The relevant attachments should be reviewed as carefully as the contract itself.

As a physician, it’s likely that you’ll be required have an active license or certification. The contract will specify what licensure is required and any related details, such as your obligation to renew the license in a timely manner.

One of the benefits of working as a contractor is that the client has a limited capacity to tell you how to carry out your work. Unless stated otherwise, contractors can hire assistants or subcontractors. There may be language indicating that only you can perform the work. This is common if you’re doing work that involves the actual practice of medicine. Take note of this language and ensure you are in agreement with it.

Typically, the agreement will indicate that you are free to carry out the work in a location of your choosing and with your own supplies and tools. Due to HIPAA requirements and other nuances of the healthcare field, you may find yourself in a situation in which the client supplies a computer or requires that the work be done in an office setting, for example.

You should be able to use your “independent professional judgement” to carry out the work. If the contract doesn’t use this phrase specifically, verify that it provides you with room to use your own judgement.

  • Does the contract clearly describe the work I will perform?
  • What are the requirements with regard to my license and certification?
  • Can I use a sub-contractor or other hired help to perform any aspects of the work?
  • What are the restrictions (if any) for where and how my services are carried out?
  • Does the language provide me with the ability to use my own professional judgement?

Compensation

Compensation is probably the main reason you’ll be doing the work in the first place. Take time to guarantee you’ll be paid appropriately for your work.

The contract should state:

  • The amount you’ll get paid
  • Whether it’s hourly, per action completed, a lump sum for a project, etc
  • If it’s variable, exactly what the payment depends on
  • Any adjustments or increases down the road
  • The frequency and timing of payments

Make note of whether payments will be made automatically be the client or whether you’re required to invoice them.

In most cases, independent contractors are responsible for their own business expenses. Despite this, though, it’s quite common for physician agreements to include reimbursement or upfront payment by the client for certain expenses. These might be license renewal fees, travel expenses, or CME costs. If the contract doesn’t specifically state that an expense will be covered by the company, expect that you will be responsible for the cost.

  • How much will I be paid?
  • When will I be paid?
  • What actions, deliverables, or services does my payment depend on?
  • Do I need to submit invoices?
  • What, if any, expenses are covered or reimbursed by the client?
  • For ongoing work, are payment increases automatically provided?

Obligations

The contract will list obligations of both you and of the company. The biggee in this section is insurance and indemnification. Many physician independent contractor agreements involving the practice of medicine or clinical judgement will require that you have malpractice insurance. The contract should state whether obtaining this is your obligation or the company’s.

As an independent contractor, it will be your responsibility to pay income, social security, and Medicare tax on your payments. This is often listed as a contractor obligation.

The handling of confidential information is often included in this section, as well, though sometimes it’s listed separately. You might be prohibited from sharing the client’s trade secrets and other confidential info or using it to benefit yourself or others.

Read all of the contractor obligations and make sure you agree to them. Just as importantly, check that any reciprocal client obligations are listed. Remember that the client wrote this contract, so it may be more favorable to them than to you. If so, request changes as needed.

It’s often a good idea as a contractor to include language stating that the client “agrees to comply with all reasonable requests of the contractor” such as access to documents that are necessary to perform your duties.

  • What insurance is required and who is responsible for obtaining it?
  • What restrictions are placed on the use and sharing of the company’s information?
  • Are the obligations “fair” to both the client and to me?
  • Is the company required to comply with me on reasonable requests?

Restrictions

Non-compete agreements aren’t as common for contractors as they are for employees. Nonetheless, they happen – especially for highly trained professionals. This clause is worth negotiating if you have any qualms about it interfering with your ability to find work and earn an income in the future. While the company may not be willing to remove a non-complete clause entirely, they are often willing to make changes to certain aspects such as

  • The length of the restriction
  • The geographic area or mileage involved
  • The scope of services that are considered to be in “direct competition”

Another common restrictive clause is a non-solicitation agreement. This may state that you cannot solicit the company’s employees or engage their clients outside of the work you’re performing for them.

There may be other types of restrictions listed, depending on the type of organization and relationship you’ll have with them.

  • If there is a non-competition clause, it is acceptable to me?
  • Am I restricted as to whether I can accept work from other companies?
  • How will this contract affect me after I stop working for this company?

Copyright and intellectual property

The language you agree to in this section depends heavily on the type of work you’re doing for the client. It lays out who has ownership of any intangible creations you develop as part of your work with the client. It may state that you retain intellectual property rights. Or it might say that you are “work for hire” – meaning that you relinquish your rights to the work.

Suppose you are writing a book chapter for the client. If the client owns the work you deliver to them, they are free to change your work, sell it (without paying you royalties), and even remove your name as an author. These things are common for contracted writers; however, you should make sure you’re mentally and financially okay with this.

  • Who owns the work I complete for the client?
  • Will I be listed as an author or inventor?

General provisions

Most contracts have a number of general provisions, many of which use standard language. But you should absolutely review and understand them. Here are a few common ones you’ll see:

Notices – Describes how communications about the contract are delivered between parties. It might indicate, for example, that an address change must be sent in writing to the other party.

Entire agreement – Often states that the agreement supersedes any prior agreement between the two parties, and how modification to the agreement can take place.

Severability – Typically indicates that if any part of the agreement is found to be invalid or unenforceable, the remainder of the contract is still in effect, to the extent possible.

Attorney’s fees – Affirms who is responsible for attorney’s fees accrued in an effort to enforce or interpret the agreement.

Governing law – Specifies which state’s law will be used in interpreting the agreement.

  • Do I understand the gist of each provision?
  • What provisions or stipulations will affect any disagreements with the client?
  • What state’s laws will be used in interpreting the agreement?

Additional articles and sections

Not all independent contractor agreements contain the same sections and articles. I’ve listed several of the most common ones here, but your contract may include more. You should read them and, if you don’t understand them, seek assistance and review them with the other party.

  • Do I understand and agree with any additional articles and sections?

Signing and signatures

The actual signing of the contract is pretty simple, but there are a couple of important points to make here. If your work is being performed through your small business, you’ll be signing the contract on behalf of your business. Be sure to list your title (owner, member, etc) under your name.

Finally, ask for a copy of the fully signed contract for your own records.

  • If I’m doing work through my LLC or other small business, is my title listed?
  • Did I receive a fully executed copy of the contract after signing?

Physician independent contractor agreement checklist

There’s a lot of important language within a single contract. You might be told at the time of hiring that it’s simply a “standard” contract that the company uses for all their contractors. That may be true; however, it’s not a reason to sign the contract without reviewing it carefully.

We’ve developed a checklist to guide you through the review process and help ensure that you don’t overlook any key aspects of the contract. Download this worksheet and keep it on hand for your next side gig!

 

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