This brief article is an introduction to Montana physician employment contracts. It is not legal advice. If you have questions concerning your Montana physician employment agreement, you should consult with a Montana employment lawyer.
First, a word about the WDEA
As you may know, in most American jurisdictions the employment relationship is “at will.” This means that either party may terminate the employment relationship at any time, with or without advance notice, and for any (legal) reason. Montana’s Wrongful Discharge from Employment Act (“WDEA”), however, severely limits the at-will employment doctrine. Upon its passage in 1987, the WDEA made Montana the only state to formally abolish at-will employment, subject to probationary periods, contracts for a “specific term,” and the reservation to the employer of “the broadest discretion” over the termination of managerial and supervisory employees. MCA 39-2-904(3).
Most states have public policy exceptions to the at-will doctrine, which may serve as the basis for the common law tort of “wrongful discharge,” but Montana’s WDEA preempts common law actions for wrongful discharge if the claim relates to the termination itself (of course the WDEA does not preempt state or federal civil rights laws protecting employees from discrimination and harassment). MCA 39-2-912(2).
In some cases, the WDEA may not apply to Montana physician contracts because the WDEA exempts from its coverage contracts for a specific term. Id.
Nonetheless, physician contracts may not be interpreted to be specific term contracts, even if they include, e.g., a 2-year term, since, as discussed below, most physician contracts do provide for a “without cause” notice of termination by either party, so long as the specified notice (e.g. 60 or 90 days) is given. See Brown v. Yellowstone Club Operations, LLC, 361 Mont. 124 (2011) (“If an employment contract for a specific term also allows the employer to terminate at will (after completion of the probationary period), it is not a ‘written contract for a specific term’” and thus falls within the WDEA); cf. McCue v. Integra Imaging, P.S., 2020 WL 3877137 (D.Mt. 2020) (“[Employer] does not argue that [physician] was subject to a probationary period nor that his contract falls outside the WDEA as a term contract.”).
In reality, most Montana physician employment contracts create a hybrid relationship between a fixed-term contract and true at-will employment. True at-will employment means that either party – employer or employee – may end the employment relationship at any time “without cause.” Most Montana physician contracts cannot be pure at-will contracts because of the WDEA, as well as the professional standards in an industry where employers, employees, and patients all have an interest in a certain level of continuity and predictability. In any event, be aware that Montana courts may hold that termination of a physician’s employment must comport with the WDEA requirements.
A final point on the WDEA is that you should also be aware of recent amendments to the statute, effective April 1, 2021, which establish a default “probationary” period of 12 months, which an employer can extend by another 6 months for a total potential probationary period of 18 months. During a probationary period, the employer may terminate an employee without cause.
Along with a target start date, the term or expected length of employment will be set forth in your contract, with a duration from 1 to 3 years being the most common. As mentioned, and nothwithstanding WDEA considerations, Montana physician employment contracts will generally include a provision for termination by either party without cause with a defined period required for notice of termination.
This section of your Montana physician employment agreement will typically indicate whether employment is full-time, and what that means, e.g. 4 or 5 days per week or a certain number of “clinic days” per week. The location or locations where you will perform your patient care is also generally identified.
The physician’s duties will also be defined in summarily in the body of your contract, or perhaps in an attached Exhibit or Schedule. Such duties include patient care, timely completion of patient records and other records required by the employer and/or by law, medical staff service, supervision of employees as needed, and administrative duties. Most physicians do not receive additional compensation for administrative duties.
On-call obligations may also be addressed in general terms, e.g. to be split equally amongst your peers – or call responsibility may be spelled out in more detail. On-call duties are often included in your compensation package (i.e. you receive no additional pay for on-call duties), but some physicians may receive additional compensation for call.
The Montana physician’s typical obligations regarding licensing, DEA registration, credentialing, privileges and Board Certification will also be defined. In addition, physician duties will include various reporting requirements, including, but not limited to, notifying the employer of licensing status changes, any disciplinary actions against the physician, or loss of privileges or DEA number; convictions of certain offenses, obviously including any action that would preclude the provider from participation in federal and state reimbursement programs such as Medicare and Medicaid; or any action barring the provider from working with insurance carriers or other third party payors.
Employer duties will also be defined in the contract, although these provisions will be addressed in more cursory fashion. Employer obligations include providing adequate staffing, facilities and equipment for patient care. The employer’s duty to pay compensation will be documented, as well as benefits and time off in the form of paid time off (“PTO”), including vacation, holidays and sick pay. If your compensation is per shift, of course, there may or may not be any ‘paid time off’ granted, i.e. you may be paid when you work and not otherwise. One advantage to shift work, of course, is that this arrangement may allow for more unfettered time off to enjoy the great state of Montana!
The compensation you will receive may be documented in the body of the contract or in an attached Schedule or Exhibit. Compensation may be in the form of a guaranteed salary, or may be determined by means of a productivity formula, or a combination thereof. Productivity can be measured in wRVUs or according to a combination of metrics. Often a physician will receive a guaranteed salary for the first year or two, phasing into a production-based compensation plan later. Your employer may also utilize quality bonuses if certain metrics are achieved; these may vary but could include consistently fulfilling charting requirements, regular attendance at various meetings, and verified patient satisfaction. Quality compensation is typically a small percentage of your total income.
Shift work compensation is also an option, whereby the employed physician gets paid by volume of work, with no guarantee but with the opportunity to enhance income by working more shifts if they are available.
In addition to the above, your employer may well provide a signing bonus, relocation expense reimbursement, and educational loan repayment assistance. Each of these forms of compensation may be subject to repayment on an amortized schedule whereby you ‘earn’ a proportionate fraction of the incentive sums you are provided for each month (or year) you are employed. For example, if your signing bonus were $15,000, with a 2-year earnout, you would be required to repay $7,500 if you leave employment after 1 year.
At some point in your contract, you will find statements concerning compliance with the Stark Law and the federal Anti-Kickback Statute. For example, the contract will provide that your compensation will not be based on the volume or value of patient referrals or on the purchase of goods or services payable by Medicare, Medicaid or any other federal or state healthcare reimbursement program. In addition to (1) the disavowal of income tied to referral volume, the Stark exception for employment of a physician by a hospital will apply only when physician compensation (2) is at fair market value, and (3) is commercially reasonable.
Professional liability insurance
Professional liability insurance (malpractice insurance) obligations will be defined in your contract, either as part of employer duties or in a separate section of the agreement. Most employers pay for malpractice insurance while the Montana physician is employed. The Montana physician employment agreement will affix responsibility for tail coverage if the policy is a “claims made” policy (“occurrence” policies generally do not require tail coverage). Some employers will cover tail insurance costs, but often physicians will be responsible for this not-insignificant expense. Your contract may well provide certain conditions under which the employer will bear part or all of this financial burden; for example, if the employer terminates the relationship “without cause,” the employer may pick up the cost, and conversely, if the employee leaves without cause, then the employee will pick up the tail coverage tab.
The termination section of your Montana healthcare employment contract will include a variety of grounds for automatic, immediate, or “for cause” termination.
These include but are not limited to the following:
- Loss of medical license, permits, or privileges
- Violation of the medical profession’s ethics and standards
- Actions leading to the termination of a relationship with insurance companies or other third party payors
- Inability to obtain or maintain malpractice insurance
- Conviction of serious criminal offenses
- Fraud, embezzlement or other financial wrongdoing
- Failure to meet applicable medical standards of care
- Breach of the employment agreement.
In addition to these grounds for termination “with cause,” your Montana physician employment contract will likely provide for termination at any time by mutual agreement between the parties, or by either party for any (legal) reason, with a notice of termination period of perhaps 60 to 90 days, or occasionally up to 6 months. It is important to be aware of your employment contract’s notice provisions, as you will want to dutifully follow the contractual requirements when it comes time to part ways with your employer.
Confidentiality concerning medical records is universally required by the terms of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA’) as well as by the terms of your employment contract. Your employer will also have its own internal confidentiality and privacy policies. Over the 25+ years since the passage of HIPAA, many employees have suffered the adverse employment consequences of a privacy violation; whether motivated by curiosity or even mistake, HIPAA renders any violation unlawful. As you can imagine, privacy issues can be a trump card for employers looking to terminate an employee who has somehow created friction in the relationship.
Restrictive covenants are contractual provisions concerning noncompetition, nonsolicitation (e.g. of patients, customers, employees, vendors etc.), as well as invention assignments and provisions concerning privacy, confidentiality, and trade secrets. To date, there are no national standards governing noncompete and nonsolicit agreements, although the early 2020s saw a push by the Biden Administration to limit noncompetition agreements. Currently, and no doubt for some time in the future, however, noncompete and nonsolicitation agreements remain subject to local regulation by each state.
Montana has a very general statute, MCA 28-2-703, which provides, in its entirety:
“Contracts in restraint of trade generally void. Any contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided for by 28-2-704 or 28-2-705, is to that extent void.”
Despite this language, the Montana Supreme Court has again recently upheld non-compete agreements, in the face of some quite compelling counterarguments. See Junkermeir, Clark, Campanella, Stevens, P.C. v. Alborn, 2020 MT 179 (2020).
And for a fairly thorough presentation of the public policy arguments against noncompetition, see the amicus brief in Junkermeir.
In Junkermeir, a case involving accountants, the Court explained that noncompetes are controlled by the following standard:
1) the noncompete covenant should be limited in operation either as to time or place;
2) the covenant should be based upon some good consideration, and must not result in a complete restrain on an employee’s ability to practice a trade or profession;
3) the covenant should afford reasonable protection for and not impose an unreasonable burden upon the employer, the employee or the public.
Among the Junkermeir Court’s other holdings was the conclusion that, “the [trial court] did not err by finding [ the employer ] had a legitimate business interest in the Covenant of protecting its client base.” Id.
Interestingly, the Montana noncompete statute, quoted above, largely mirrors California’s statute, but in California this statute has been interpreted to ban employment non-compete agreements, i.e. to mean what it says. Compare MCA 28-2-703 with Bus & Prof Code 16600. In any event, if you have any questions about the import of contractual restrictive covenants, you should consult with a Montana employment contract attorney.
Many Montana physician employment agreements will include an arbitration provision. A practical note here: If your employer is inclined toward arbitration, the arbitration requirement will not be subject to negotiation. Thus, at a minimum you should understand the consequences of what you are signing, even though there is little, as a practical matter, that you can do about it. Understand that you are forgoing the right to a jury trial or appeal in a court of law once you have signed an arbitration agreement.
Arbitration is touted as a more efficient, less-expensive alternative to litigation (the relative merits versus drawbacks of arbitration are subject to debate among employment lawyers, and to an increasing extent among the public and national and policy makers, as arbitration requirements are also found in a plethora of consumer contracts). In any event, we are working in an era when arbitration is commonly-required; the Federal Arbitration Act (“FAA”), a statute with preemptive force, strongly favors arbitration; and your Montana employment contract may well provide for arbitration consistent with the FAA and the Uniform Arbitration Act, Montana Code Annotated, Title 27, Chapter 5.
General black-letter law provisions
Like most contracts, your Montana physician employment contract will generally conclude with a number of largely boilerplate legal provisions. Most of these are relatively straightforward and do not require a legal education to interpret. A few are perhaps less easily understood. For example, an integration clause is fairly simple in concept; it will state that the contract at hand contains all matters of agreement on the subjects addressed between the employer and physician; and that the contract includes and/or supersedes all prior written or verbal agreements. While that is an easily understood concept, the significance of this provision in practice is important. An integration clause means that any major issue you would like to see addressed should be included in the final employment agreement. Insignificant matters need not be included, but if important promises have been made during recruiting – e.g. a signing bonus, or assignment to only particular certain facility or location, or that a specific schedule or scope of practice is preferred or required – those promises or conditions should be included in the contract; if not in the body of the contract, then they should be addressed in an attached Exhibit or Schedule.
A similar contract provision that is easily understood, but is sometimes honored in the breach, is a term providing that any amendments must be in writing. This provision may be included in the integration clause, or may be included as a stand-alone section. In the employment law arena, one often encounters informal amendments to contracts, which may be fine so long as the relationship is going well, but informal amendments leave open the possibility for misunderstanding down the road. If it is important and can be committed to writing, it should be included in the employment contract.
Physician employment contract review
As a Montana physician contract lawyer, providing employment contract review and consultation services is an important part of my practice. Because most physician employment contracts are drafted by the employer’s attorney – and are filled with legalese – it is wise to review and discuss your Montana physician employment contract with an experienced employment attorney. I have been representing employees for nearly 30 years in a wide variety of employment law matters, including the litigation, arbitration, mediation, and negotiation of employment contracts.