LETTER OF THE LAW

Getting Technical

Learn about the technical clauses in your employment contract, so you can protect yourself in an employer-employee dispute.

By Joseph W. Gallagher, Esq., LL.M., and Mark E. Kropiewnicki, Esq., LL.M.

When entering into an employment agreement, most new ophthalmologists tend to focus on the key financial and business aspects of the contract, such as salary, bonus, fringe benefits, a restrictive covenant and the possibility of eventually becoming an owner in the practice. From a legal perspective, however, an employment contract contains much more than that. Many technical clauses and provisos exist, which may only come into play when issues or disputes arise between you and your employer. Much of the technical legalese often is ignored until an unpleasant situation occurs. Familiarizing yourself with the terms and conditions of these clauses, however, may give you the upper hand in resolving a dispute. Here, we'll explain what the technical clauses mean and how they can work in your favor.

Automatic Renewal

An automatic renewal provision (also known as the evergreen clause) means that when the initial term of the contract expires, the contract automatically remains valid without any additional action or documentation. For example, the clause might state: "This agreement shall be in effect for a period of one year from January 1, 2008, through December 31, 2008, and shall continue from year to year thereafter."

Automatic renewals are useful because they eliminate the need to renegotiate your entire agreement each year. However, if your contract doesn't provide for an annual salary review, make sure you talk to your employer about a raise before your contract automatically renews. Otherwise, you'll be stuck with the same salary for another year.

Termination Clauses

There are two types of termination provisions: "for cause" and "no-cause." The "for cause" provision gives you the right to terminate your employment contract for a good reason, such as loss of hospital or prescribing privileges or the inability to meet patient care obligations. Similarly, you can terminate the agreement "for cause" if, for example, the practice fails to pay your compensation when it's due.

The "no-cause" provision enables you or your employer to terminate the contract for no stated reason by providing a written notice 30 to 120 days in advance. A typical "no-cause" termination provision reads like this: "Notwithstanding anything contained herein to the contrary, either party may terminate this agreement for any reason or no reason, without cause, by providing ninety (90) days prior written notice to the other of its intention to terminate this agreement." Make sure the contract has a notice period that gives you sufficient time to make a transition into your next position.

In addition, if your compensation package includes a bonus clause, consider the impact the "no-cause" termination may have on the timing of your eligibility for and the payment of your bonus compensation. For example, if your contract states that the bonus payment date is the last day of the quarter and that you must be an employee on that date to receive the bonus for that quarter, make sure you take this into account if you decide to exercise your "no-cause" termination right.

Policies and Procedures

Many employment agreements have a harmless-looking sentence that says that the duties of the ophthalmologist will include following the policies and procedures of the employer as communicated to the employee from time to time. Here's an example: "In addition to the clinical and administrative duties applicable to the employee, the employee shall abide by the practice's policies and procedures as adopted by the employer from time to time, and as communicated to the employee in writing or verbally." In a worst case scenario, when there's no good reason to end a contract (and the "no-cause" option doesn't exist in the agreement), an employer could attempt to terminate the contract based on your failure to follow instructions or procedures that may have been mentioned only in passing and never put in writing. Often, if a dispute arises concerning possible termination in this case, it will depend on how significant the verbal policy or procedure is in terms of its relevance to the employment relationship, and if there was damage to a person or property as a result of not following the instructions.

Arbitration Clause

It's becoming more and more common for practices to include a "binding arbitration" clause in an employment agreement. Many employers are requiring employees to give up their rights to take an employment dispute to court. They believe juries are more likely to be sympathetic to you as an individual. Instead, employers ask you to submit disputes to a neutral third party, called an arbitrator, for a final resolution. Arbitration is generally less expensive, faster and less stressful than going to court. Also, the process is less intimidating.

However, arbitration limits you to a single person's decision, without the opportunity to submit your case to a jury through the court process. Arbitration also limits the amount of information you can force your employer to disclose — called discovery. This usually works to an employee's disadvantage, because the employer has much more information and documentation than is usually presented.

It's also very difficult to appeal an arbitration case. Usually, you must prove that the arbitrator was personally biased to the point of affecting his ability to rule fairly. Or, you must prove the arbitrator "manifestly disregarded the law." Some courts have interpreted this to mean that an arbitration ruling will be overturned only if the arbitrator understood and correctly stated the law, but ignored the law in applying it to your case.

Waiver of Breach

A waiver of breach provision allows your employer to enforce a specific term of your employment agreement that it may have previously allowed you to breach. For example, if your employment agreement requires you to work a minimum of 40 hours a week, but the practice occasionally has allowed you to work less, such a clause states that the employer's previous acceptance (waiver) of the breach doesn't bind it to future acceptance of the breach.

An example of such a clause is: "Neither the failure nor any delay on the part of any party to exercise any right under this agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or further exercise of the same or of any other right, nor shall any waiver of any right with respect to any occurrence be construed as a waiver of such right with respect to any other occurrence."

Notice Provisions

Employment contracts usually state that any notice given by one party to the other (such as notice of termination, notice of employment policies or notice of a change in compensation or benefits) must be done in writing. Return receipt generally is required to confirm the notice has been successfully delivered. Make sure that if you're the one giving the notice (ie, notice of your intent to terminate your employment or notice of breach by the employer) that you follow the notice procedures precisely. Otherwise, the employer can ignore the notice (potentially costing you valuable time in the process).

Understanding Legalese is Key

Legalese may seem dry and boring, but it's important to review the language of your contract in its entirety. Know how the "boilerplate" provisions can work against you or to your advantage in the event of a dispute. The meaning of technical provisions won't always be apparent. When in doubt, contact an attorney to review and explain the substance of provisions that are commonly included in employment agreements. nMD