Physicians shouldn't assume outside work is OK with employer

A column examining the ins and outs of contract issues

By — Posted March 5, 2012.

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A contract clause of particular interest to many physicians is the one defining what a physician can and cannot do outside of providing medical services on behalf of the employer. So, can the physician engage in outside activities such as moonlighting, volunteering and serving as an expert witness?

Moreover, if income is generated from these outside activities, who does that income belong to -- the physician or the employer? These questions should be answered clearly in the employment agreement. If the answers do not mirror the physician's lifestyle, then these terms should be negotiated with the employer and put into that agreement.

The first question is whether the physician is permitted under the employment agreement to participate in activities or perform services outside of employment. Some employers prohibit engagement in outside activities and services altogether, while others permit certain activities that do not interfere with the physician's day-to-day responsibilities.

Physicians should be aware of requirements that give the employer the right to approve or reject outside activities. Regardless of whether the physician wants to be able to engage in moonlighting, expert witness consultations and testimony, speaking opportunities, volunteer efforts, teaching, research and publishing, the physician's desired activities should be specifically identified in the employment agreement as permitted activities.

I had a client who was joining a medical practice and was presented with the group's template employment agreement. The draft agreement precluded the physician from participating in any medically related outside activities. In the past, the doctor had served as a volunteer physician for the local marathon and as a medical expert witness. He also was a frequent paid speaker at conferences.

For this doctor, a prohibition on outside medical activities did not align with his interests. With minimal discussion, the practice permitted the doctor to identify the outside activities that he could conduct without violating his employment agreement:

"Notwithstanding the foregoing, [the physician] shall be permitted to engage in the following activities (each a 'Permitted Activity'), so long as such activities do not materially interfere with his duties under this Agreement: (i) civic, philanthropic and community service activities, including, without limitation, volunteering for the [marathon] and (ii) speeches, publications, lectures, expert consultations and expert testimony which do not involve or relate to services performed by the Practice."

If a physician is permitted to engage in outside activities or services, the question of whether income generated from such activities belongs to the physician or the employer is often a topic of negotiation, and the two sides frequently do not see eye to eye.

Physicians, on the one hand, often view the income generated from permitted outside activities as separate and apart from their services on behalf of the employer and thus outside the reach of the practice. This position is strengthened if the activity occurs on the physician's own time and outside of the employer's hours of operation.

Employers, on the other hand, often view income from outside activities as part of the employment relationship with the physician. Some employers believe that the physician would not have had the opportunity to participate in the outside activity but for the physician's employment with the particular employer.

My client physician's employer felt that it already was conceding by allowing the doctor to engage in outside activities. It insisted that any payment received for these services should be remitted to the practice. The physician agreed to this. However, we negotiated for the outside activity monies to be included in his collection amounts, which was a factor in calculating the physician's compensation: "All monies received by [the physician] from the Permitted Activities shall be remitted to the Practice and shall be included as employee collections in calculating [the physician's] compensation under this Agreement."

The last question is whether outside activities are covered by the physician's liability insurance policy. If the employer provides the policy for the benefit of the physician, the employer (and the insurance carrier) may exclude activities performed by the physician outside of his or her employment.

This is often an issue for physicians who want to moonlight, as moonlighting for a third party is frequently excluded from coverage. It is important that the physician consult the insurance carrier to confirm whether certain activities are covered under the policy. It may be that a separate policy is required to insure the physician's outside activities, even those activities that are unpaid.

Contract clauses describing what the physician can and cannot do outside of the employment relationship are of key importance. It is best to address these issues at the onset of the employer-employee relationship so that all parties are on the same page from the beginning.

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