June 17th, 2023
PHYSICIAN CONTRACTS: WHAT IS “CONTRA PROFERENTEM” by Jim W. Vogele
Contra proferentem is a Latin term which means that any ambiguous contract or provision in a contract will be construed against the drafter – meaning in a light most favorable to the non-drafting party. The contract interpretation rule of contra proferentem is a little bit like ‘seller beware’ in the world of contract law.
How does contra proferentem relate to a physician contract?
The contra proferentem legal concept is related to a “REPRESENTATION OF COUNSEL” provision you will see in your California physician contract – or Montana, Oregon, or Washington physician contract. Such a provision will indicate that the employed physician has had an opportunity to have the physician contract reviewed by an attorney of the employee’s choice; it will also likely state that the physician has had an opportunity to negotiate the contract; and it will provide that, while the employer’s attorney drafted the contract, the contract will not be construed against either party (or conversely, in favor of either party at the expense of the other).
The application of contra proferentem
As it is typically interpreted, where two sophisticated parties, e.g. two large corporations, have been represented by experienced legal counsel and have negotiated or even heavily negotiated a contract, then a court or arbitrator will not apply the contra proferentem doctrine; and thus any risk of ambiguity will be jointly assumed by the parties.
On the other hand, where the two parties are not equally sophisticated and the more ‘sophisticated’ party (we’ll assume this is the employer, which is usually the case) has drafted the contract, the employee may receive the benefit of the doubt if a provision were ambiguous. Note that by saying that the employer has drafted the contract, nine times out of ten this means that the employer’s attorney has drafted the contract (one still sees a few physician employment contracts drafted by someone other than a lawyer; . . . . often the results are not so good).
But this question – of who gets the benefit of the doubt or upon whom is the benefit bestowed, if you prefer – only gets answered, generally, if there is a serious conflict that leads to an arbitration or litigation. And what rationale employee wants to, or can afford to, go there? Additionally, how many arbitrators or courts would truly give the physician the benefit of the doubt, and decisively construe the contract in their favor, if the contract includes a provision stating that both parties had the opportunity to consult with an attorney? This is the unfortunate reality of legal disputes. And this is what makes it important that you understand your contract up-front and have set reasonable expectations and lines of accountability with your employer.
None of this is to suggest that physician employers are generally less than trustworthy. Far from it; indeed, in my experience that is extremely rare. So infrequently is it the case that physician employers are untrustworthy, that when they are we may well be reading about their involvement in some sort of CMS fraud or False Claims Act case. But again, that is uncommon enough to be a true outlier event. Much more likely, when a dispute arises over a contract provision between employer and employee, is that the dispute will involve a difference of interpretation of an unfortunately vague provision.
How can your physician contract review lawyer help?
This would of course be the appropriate place to state, not surprisingly, that this article is, on the one hand, self-promotion in that I am an experienced California physician contract attorney. Just as I am also an experienced Washington physician contract attorney, Oregon physician contract attorney, and Montana physician contract attorney. I work with physicians and other healthcare providers on their employment contracts on regular, often daily basis.
On the other hand, however, I always feel there is at least a chance that a little article such as this will help answer a question in the minds of some residents, fellows, or even experienced physicians: “Do I need to have an attorney review my physician contract?” The answer is, no, you do not need to consult with a physician contract review attorney. This is so, because the representation of counsel provisions you see will invariably say only that you had the opportunity to seek legal advice, and not that you must seek legal advice.
Furthermore, you could consult with a contract adviser who is not an attorney, provided that they are knowledgeable and experienced with healthcare provider contracts. I am not attempting to promote the services of other physician contract review advisers. But I’m also pragmatic and I strongly believe that an employee – even a relatively sophisticated (and obviously smart) employee such as a physician – does need someone on their side when it comes to entering into formal contractual agreements. And let’s face it, your contract provides the roadmap for what the next few years of your life will look like in the workplace. Yes, conditions ‘on the ground’ often vary, but having relatively clear expectations at the outset provides some important guardrails – floors and ceilings, if you like, for both parties.
As I have said elsewhere, it’s generally a good idea, regardless of the jurisdiction you are in, to have an attorney review any important contract that you are asked to execute. And physician employment agreements are certainly important contracts. Hence, a consultation with a California physician contract review attorney may well be useful, and of course the same goes for working with a physician contract review attorney in Oregon, Washington or Montana.
People enter into contracts all the time without legal advice – your agreement with your telephone provider, your streaming service, your cloud storage resource, your credit card company, and on and on, are all contractual relationships. And the average consumer rarely has legal advice prior to entering into such a relationship – for many obvious reasons. But don’t forget, as well, that if something goes wrong, the consumer is pretty darn unlikely to prevail in a serous dispute. I don’t mean to be overly pessimistic here, just realistic and pragmatic.
As an employment attorney who has handled all sorts of disputes over a fairly long career, including trial work (aka litigation), arbitrations, mediations and negotiations, I have seen and handled quite a few disputes over contracts. In each of the contract matters I have handled, whether in court, arbitration or otherwise, I would say that in some manner the contra proferentem doctrine has played a part. In a couple cases I have had, the principle has played a major role. In a case involving a CMO whose contract stated that the CMO would receive a substantial severance payment if employment terminated after a certain amount of service to the company, the entire dispute centered over the meaning of the term “continuous service.” I know, it seems like reasonably straightforward concept, but let’s just say in practice, in that case, if was far from simple; and, indeed, the legal issue was quite complex, with some but not a lot of reported legal authority to aid in resolving the particular issue that arose in that matter. There are contexts in which the principle of “continuous service” has been analyzed, but not much in the unusual circumstances we were addressing. All’s well that ends well, and the matter was resolved to the parties’ mutual satisfaction, or, in any event, we can say that the parties were each sufficiently satisfied that we reached an agreement, money changed hands, and everyone went on with their lives. In that case, contra proferentem was very helpful to my client, who, although a sophisticated medical professional, had not sought legal advice before signing the contract.
Back to contract interpretation: Maxims of Construction
So . . . contra proferentem. It can be a useful tool in the world of contract analysis. But it is also not the first step that a court or arbitrator will take in order to interpret the meaning of a contract. In most jurisdictions, the basic steps to interpreting a contract are:
First, the decision-maker will look at the express terms of the agreement – the “four corners of the contract” – and determine whether the agreement is clear, is subject to only one reasonable interpretation, and is thus unambiguous; in that event, the agreement can be interpreted as “a matter of law” and a jury trial or hearing to resolve facts is unlikely necessary.
Second, if step one does not resolve the question, then extrinsic evidence concerning a variety of additional factors may be considered, including the intent of the parties, the context in which the agreement was negotiated and executed, and, on some occasions, any applicable industry standards or the course of dealing between the parties.
Third, if the meaning of the contract is still not sufficiently clear to determine which party’s proffered interpretation is correct, the decision-maker may resort to “maxims of construction.”
Contra proferentem is one such maxim of construction; and as mentioned above, in real world disputes – recall the CMO with the “continuous service” prerequisite to receiving severance pay – contra proferentem can make a difference.
Other maxims of instruction include the principles that:
- a more specific provision will control over a more general provision;
- noscitur a sociis, which means that words are known by the company they keep — otherwise stated, the language of a contract must be considered in light of the surrounding verbiage; and
- expression unius est exclusion alterius, which provides that when certain matters are addressed in a contract, but other similar matters are omitted, then the omissions were intentional (and are not to be considered an implicit part of the contractual agreement).
As you can imagine, these maxims of construction, including contra proferentem, will save the day for an employee in a physician employment contract dispute only on rare occasions. The ideal situation is that the contract says what it means, in plain English, is not ambiguous or overly vague, and that both parties understand the contract which their mutual intent.
Note here that I am a big fan of asking questions when one does not understand a contract provision. Your physician contract review attorney can likely answer most of your questions. But if they cannot, and specifically if I cannot, then I will generally advise you to ask your employer about the meaning of any vague language. Because if I cannot understand the intention of a contractual provision, then there may be a drafting problem. And, indeed, often the lack of clarity may be simply poor draftsmanship. Once in a while the explanation won’t be entirely benign. I have seen physician compensation provisions that seemed to be intentionally inscrutable. More commonly, you may see hedging language that turns out to be the drafting party not wanting to commit to anything in particular. For example, your schedule will include “up to” five shifts a week. In practice, that might mean that you will be scheduled for one shift a week, or even no shifts per week.
I am the first to admit that contract interpretation is not the most exciting topic. Just this past week I made an employment contracts presentation for the Oregon State Bar to a group of Oregon attorneys who are, primarily, early in their careers as employment lawyers. These attorneys were participating in an intensive, two-day employment law ‘boot camp.’ I have served as an instructor at this ‘boot camp’ before, providing an introduction to employment contract law and practice. Each time, I anticipate that the topic will come across as quite boring, to be frank; yet, each time, when the course is over, I somewhat reluctantly conclude that contract law is one of the more important substantive law topics that a competent employment lawyer should master.
All employment is contractual – whether the employee has a written contract or not. And employed physicians are almost always employed pursuant to formal written employment agreement. This is true whether you have a California physician contract, Washington physician contract, Oregon physician contract, or Montana physician contract. And this is true for every other jurisdiction in American, too. Physicians are employed, when they are employed, with written terms and conditions of employment that are almost always crafted by the employer and its attorneys. For this reason, it is a good idea to consult with your own physician contract review attorney prior to signing an employment contract. This way, you won’t find yourself in the position of having to rely primarily upon contra proferentem in the event you have a dispute about the meaning of your contract.
Ideally, there will be no dispute about the meaning of your contract in the first place if you have solid understanding the agreement from day 1.
I appreciate your time. Thank you for reading!