University of Washington School of Medicine
Seattle, Washington
Signing an employment contract is one of the most important decisions in a physician’s career. It determines not just your pay but also your professional rights, obligations, and future opportunities. Yet many physicians skim over these documents or sign them without understanding the long-term implications. This is a mistake.
Employment contracts are legally binding agreements. Getting help from a lawyer experienced in healthcare employment law is not only smart, it’s essential. These legal professionals command significant hourly rates, but much like gastroenterologists, their expertise is well worth the investment.
In this first part of a 2-part guide, I offer practical tips to help physicians understand the key elements of employment contracts, recognize which terms may be negotiable, and identify potential pitfalls and key provisions that warrant close attention.
Understand the Term of the Contract
The term defines how long the contract lasts and whether it automatically renews. Most physician contracts are written for 1 to 3 years, sometimes with autorenewal. You should confirm whether partnership decisions are tied to the contract term and get timelines in writing. Be wary of contracts that allow employers to renew or end the contract abruptly or without justification.
Review Termination Clauses Carefully
Employment contracts typically include 2 types of termination clauses: “for cause” and “without cause.”
For-cause termination includes serious issues, such as loss of licensure or criminal conduct. These clauses should be narrowly and clearly defined to avoid overly broad interpretations. The employer should be required to provide written notice of any complaint or alleged cause for termination, along with a clearly defined timeline—typically 15 to 30 days—for you to respond and resolve the issue before the termination is finalized.
Without-cause termination allows either party to end the agreement, usually with 60 to 180 days’ notice. Remember that it would take you at least 90 to 120 days to secure a new position, obtain privileges at a new facility, and begin receiving pay. For this reason, aim for a minimum of 90 days’ notice in the without-cause clause. If the employer insists on a shorter notice period, consider negotiating severance pay and forgiveness of signing and relocation bonuses. Also, ensure the clause is reciprocal. If the employer can terminate you on short notice, you should be able to leave the position with the same notice period.
One key point to confirm is who is responsible for “tail” malpractice insurance in the event of contract termination, which I discuss in more detail below.
Don’t Overlook the Need For “Gap” or “Tail” Insurance
If your malpractice insurance is “claims made,” the most common type, it means that you will need tail coverage to protect yourself from claims filed after you leave your job. This is because claims-made insurance only provides coverage if the claim is related to a service performed during the period of coverage and filed while the policy is still active. It is not enough that the patient encounter occurred while you were covered; the lawsuit must be filed before the policy expires. For example, if you treated a patient in 2022, left your job in 2023, and are sued in 2024, you would not be covered unless you purchased tail coverage.
Tail insurance extends your protection beyond the end date of your original policy and is critical for ensuring you are not left personally liable. However, tail insurance can be costly, sometimes tens of thousands of dollars. Always clarify in your employment contract who is responsible for purchasing tail coverage upon termination. If you are expected to pay for it yourself, request cost estimates in advance. Try to negotiate for the employer to cover the cost, especially if you are terminated without cause.
Occurrence-based malpractice insurance covers any incident that took place while the policy was active, regardless of when the claim was filed. For example, if you treated a patient in 2022 while covered by an occurrence-based policy, you would still be protected if the patient files a lawsuit in 2026, even after you left the job or the policy has ended. This type of insurance does not require tail coverage, which can simplify transitions between jobs. However, occurrence-based policies typically have higher premiums than claims-made policies.
Restrictive Covenants: Know Your Boundaries
A restrictive covenant—also known as a noncompete clause—may prevent you from practicing within a certain geographic radius for a set period, often 1 to 2 years after leaving an employer. Similarly, a non-solicitation clause may bar you from encouraging patients or staff to follow you to a new practice. These provisions are legally enforceable in many states and should not be dismissed as boilerplate. The best time to address them is during the initial contract negotiation. Negotiate for the narrowest possible scope in terms of both time and geography. For example, a 5-mile restriction for 12 months may be more defensible than a 25-mile restriction for 2 years.
While restrictive covenants increasingly have been challenged in court, many states continue to uphold them, especially when they are clearly written and applied consistently. In general, the more unreasonable the geographic radius or duration, the more likely a court is to find the provision unenforceable. However, it’s unwise to rely on this outcome.
Instead, physicians should attempt to negotiate fair and limited terms up front. Employers, especially larger group practices, may be reluctant to offer customized covenant terms to individual physicians, as a patchwork of different agreements could increase the risk for successful legal challenges based on inconsistent enforcement. Understanding the enforceability of restrictive covenants in your specific state and advocating for reasonable limits at the contract stage are essential to protecting your future opportunities.
Assignability: Who Can Take Over?
An “assignability” clause determines whether your employment contract can be transferred to another entity—such as a hospital system or large practice group—in the event of a merger, acquisition, or sale. If the contract is assignable, your employment automatically continues under the new ownership, even if the organizational structure, culture, or leadership changes significantly. If it is nonassignable, the contract terminates, which may allow you to walk away, but often without severance pay or job security. Consider negotiating protections, such as a release from any noncompete clause, eligibility for severance pay, or a financial payout, if your role is materially altered or eliminated following an acquisition.
Related Content
This issue is gaining increasing relevance as the pace of mergers and acquisitions accelerates across the gastroenterology landscape. Private equity–backed consolidations and group practice roll-ups are becoming more common, and many physicians are surprised to find themselves working for a new employer without having had any say in the transition. Assignability clauses that favor the employer can leave a physician vulnerable if the acquiring entity changes compensation models, work expectations, or practice autonomy.
It also is important to review whether the assignability clause is unilateral, allowing only the employer to assign the contract, or reciprocal. While it’s typical for employers to retain the right to assign, employees generally cannot transfer their contracts to another entity, such as a personal services LLC or professional corporation. Although rare, this may be relevant if you plan to practice under a different legal structure in the future. A knowledgeable healthcare attorney can help evaluate the implications of this clause and negotiate terms that protect your long-term interests.
Conclusion
In this first part of our contracting guide, I highlighted key aspects of physician employment agreements, including foundational terms and potential pitfalls to watch for. In the second part, we will explore critical topics, such as compensation models, partnership tracks, benefits, and other provisions, that shape the long-term value of your contract. Whether you’re evaluating a first job or renegotiating an existing agreement, understanding these elements is essential to securing a mutually beneficial arrangement that supports your career goals and preserves your future options. Best of luck!
For any questions, feel free to reach out to me at klausmergener@aol.com.
This article is from the July 2025 print issue.