AAOS Now

Published 10/1/2007
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Stephen P. Makk, MD, MBA

Negotiating your orthopaedic employment contract

Make sure you can live with the details
One of the most important documents orthopaedic surgeons encounter in their professional lives is their employment contract with an orthopaedic group. The contract is just as important for surgeons entering practice as it is for surgeons switching practices midcareer. It’s no less important than a prenuptial agreement or your last will and testament.

When you are evaluating orthopaedic surgery employment opportunities, focus not only on the starting salary, benefits, and bonus opportunities, but also on the partners, the ancillaries, and the community where you’ll be living. The relationships in any practice and the quality of life outside the practice can magnify both benefits and problems and should be an integral part of your decision-making process.

Keep in mind that contracts should be tailored to your specific needs because the contract serves as the governing document not only when things are running smoothly but also when there are disagreements. You should always consult an attorney before agreeing to any employment contract. I can personally recall changing one sentence of an employment contract that literally saved me about $250,000 when the practice ended. Contracting, consequently, should not be taken lightly.

The contracting process
The contracting process typically begins with what is known as a letter of intent. This is usually an initial discussion of some of the issues that will be included in the employment contract. Depending on the intent of the parties, the letter of intent is usually not binding and is typically considered a preliminary negotiation.

Once the parties complete initial discussions, they will begin negotiating a binding employment agreement, which should address everything from the working conditions to dissolution of the arrangement. Most employment agreements contain the following clauses:

  • purpose of the contract
  • compensation and benefits
  • term of the contract
  • termination
  • work definition
  • benefits
  • partnership process
  • restrictive covenant or noncompete

Other elements may also be included, depending on the type of practice.

Contract clauses
The “purpose” clause usually states what services a practice is licensed to provide (ie, orthopaedic surgery). This purpose usually provides the broad parameters to the scope of contract.

The “compensation” clause should include your starting salary as well as descriptions of the bonus structure and any other inducements.

The “term” clause should have both a specific beginning date (ie, the signing of the contract) and an ending date. This clause may also define the next steps for becoming eligible for partnership.

The “termination” clause explains the process and conditions of termination of the contract.

The “work definition” clause states your duties and will probably require the exclusive use of your efforts in these duties. It may also require that any money you collect for your services should be received by the practice. In other words, no moonlighting.

The “benefits” clause defines such things as vacation time and disability coverage. Additional benefits such as severance expenses or payment by the practice for any medical liability “tail” coverage necessary from your leaving a previous practice arrangement may be covered in their own sections.

The “partnership” clause should be as detailed as possible. You should not rely on express or implied promises made outside of a written contract. This clause also typically has several stipulations and a formula for buying-in as a partner.

The “noncompete” clause is common. These clauses usually encompass a time period, scope, and possibly distance from the practice. These provisions should be reasonable or they may not be enforceable.

For more information
This article is intended to give an introduction to employment contracts. You’ll find a more detailed version on the AAOS online Practice Management Center Web site (member login required at
www.aaos.org/pracman). The online Practice Management Center also features several other articles that can benefit the “business side” of your orthopaedic practice.

Stephen P. Makk, MD, MBA, is chairman of the Practice Management Committee. This article is not intended as legal advice; consult an attorney for your specific circumstances.