Understand your employment contract
You’ve completed your residency and are preparing to take the next big step — accepting your first job. Before you do, it’s essential to review your employment contract carefully.
Not sure where to start? This guide explains key contract terms you should understand before signing. These are parts of the contract that can impact on your responsibilities, compensation, and long-term career satisfaction. The guide also identifies common red flags and offers remedies to address them.
This information is provided as general guidance and is not intended as legal advice. Employment contracts can vary widely, and state and federal laws may affect how certain terms are applied. Physicians are strongly encouraged to consult an attorney for a thorough contract review to ensure compliance.
Duties and work schedule
The contract should clearly describe your duties, including both clinical and non-clinical work. Importantly, it should address administrative duties such as EHR documentation, prior authorizations, and quality reporting. If your duties will include research, teaching, or supervision, these should also be described in the contract.
Regarding your work schedule, the contract should state whether the role is full-time or part-time, your weekly hours, patient care hours, and any expectations around weekend, evening, or on-call hours. It should also state your primary work location if multiple sites are involved.
Red flag
Job duties, schedule, and primary work location are vaguely defined or left entirely to the employer’s discretion.
Red flag language: The Physician’s location of work shall be determined by the Employer as needed.
What it means: You could face unexpected hours, last-minute location changes, or excessive non-clinical work without additional pay or support.
Better language
Request a detailed written description of clinical and non-clinical duties, expected weekly hours, on-call requirements, and work locations.
Suggested language: The Physician will receive an annual base salary of $___, paid biweekly, with additional incentive compensation based on RVU productivity and quality metrics, as outlined in Schedule A. All compensation is subject to standard tax withholding.
Schedule A should set forth in detail how the incentive compensation will be calculated, including, if applicable, the value placed on RVUs you personally generate in excess of a stated threshold.
Compensation
This section sets your base salary and bonuses. Make sure you understand the compensation formula, especially if it’s tied to productivity or value-based care metrics such as Relative Value Units (RVUs). The contract should also state that the practice will withhold taxes on your behalf.
Some contracts include incentives for participating in value-based care programs, but there may also be penalties for failing to participate.
If the practice offers co-ownership, your contract may include terms for becoming an owner. Review these provisions carefully to understand the timeline, financial commitment, and decision-making rights that come with ownership.
Red flag
Compensation terms, especially bonuses tied to productivity or performance, are vague and not clearly defined in writing.
Red flag language: Eligibility for bonuses based on performance and productivity will be determined by the Employer.
What it means: You may not know how your pay is calculated, when it’s paid, or how your compensation is impacted by performance.
Better language
Ask for concrete salary terms with defined metrics, frequency of performance evaluations, and a schedule for bonus payments.
Suggested language: The Physician will receive an annual base salary of $___, paid biweekly, with additional incentive compensation based on RVU productivity and quality metrics, as outlined in Schedule A. All compensation is subject to standard tax withholding.
Schedule A should set forth in detail how the incentive compensation will be calculated, including, if applicable, the value placed on RVUs you personally generate in excess of a stated threshold.
Benefits and insurance
This section outlines the benefits offered by the practice, which may include health and life insurance, retirement benefits, CME reimbursement, funding for medical licensure and society dues, and coverage for commuting. Keep in mind that certain benefits such as retirement plans may have waiting periods before you become eligible.
Your contract should also specify your coverage under health insurance, both for an individual and family. Know your share of premium costs, the extent of coverage, and when benefits take effect. Some employers may also provide supplemental insurance options such as dental, vision, life, or accident coverage.
In addition, malpractice insurance may be included. Coverage is often provided by the practice, but the terms can vary, so it’s important to confirm who is responsible for paying the premium.
Red flag
The contract does not specify who pays the malpractice insurance premium.
Red flag language: The Physician will be covered by claims-based malpractice insurance for the duration of employment.
What it means: While malpractice coverage may be mentioned, the cost responsibility could fall on you during the term and after the term of the contract. Unclear language may leave you with unexpected expenses.
With a claims-based insurance policy, there is the ongoing cost of the coverage while the physician is employed and then there is the cost of the coverage for after the physician separates from the practice (sometimes called “tail coverage”).
Better language
Request that the employer cover the full premium and specify whether the provided policy is claims-made or occurrence. The latter is preferred because it does not depend on when the claim is filed. Who is responsible for the cost of tail coverage is an especially critical issue that is often heavily negotiated.
Suggested language: The Employer will provide, and pay in full all of the costs related to, professional liability insurance coverage with limits of at least [typically One Million Dollars per claim Three Million Dollar Aggregate] to cover all claims against the Physician related to his or her professional services on behalf of the Employer whether the claim is filed during or after the term of the Agreement.
Vacation, sick time, and CME days
This section describes your vacation days, sick leave, and other types of paid time off (PTO). Keep an eye out for whether you’re compensated for unused vacation time or if it carries over to the next year, though neither is typical. The contract should specify how both vacation and sick days accrue and are tracked.
The contract should also outline a policy for professional development, including time off for continuing medical education (CME). Some contracts may provide additional days off specifically for CME, while others include it within your general PTO.
Red flag
CME support and paid time off for CME are not mentioned or defined.
Red flag language: The Physician shall be entitled to paid time off and may participate in continuing medical education as approved by the Employer.
What it means: You may be responsible for covering required CME expenses yourself and may need to use personal time to complete them outside of regular working hours.
Better language
Request an annual CME stipend and designated paid time off for CME activities.
Suggested language: The Physician shall receive 20 days paid time off per year, including 5 days for CME, plus a $3,000 annual CME stipend. Sick leave includes 10 paid days.
Social media and online influencing
Many young dermatologists are active as online influencers or content creators. Your contract may include provisions related to your social media presence, marketing activities, and outside endorsements. It’s important to understand any restrictions on how you represent yourself and your employer online, and whether you need prior approval for sponsored content.
Red flag
Vague or overly restrictive social media or marketing clauses.
Red flag language: The Physician shall not engage in any public communications, advertising, or promotional activity without the prior written consent of the Employer.
What it means: You may be limited in how you promote yourself or your work online, including restrictions on endorsements or independent branding.
Better language
Ask for clear, reasonable guidelines that allow professional social media use, require approval only for relevant endorsements, and clarify ownership of online content.
Suggested language: The Physician may maintain a personal or professional social media presence and may engage in public educational content, in accordance with all applicable laws regarding patient privacy,and provided the Employer is not misrepresented.
Sponsored content or endorsements related to health care products or services require prior written approval. Any use of the Employer’s name, logo, or branding must be approved in advance.
Contract termination
The contract should specify the terms on which your employment ends. The contract can be ended either for cause, or without cause. Generally, terminating a contract for cause means that one or more obligations under the agreement were breached. Some contracts provide you with a right to cure certain types of breach before the termination becomes effective. Where there is no cause termination, contracts typically require a notice period and may impose other conditions. Ideally, the notice period for without cause terminations provide sufficient time for you to find another job or the employer to find another physician to minimize the disruption caused to both parties by such terminations.
Some contracts also include post-termination obligations. For example, the contract should address tail insurance, which covers claims made after your malpractice policy ends.
Red flag
Termination timelines, requirements, or post-employment obligations are vague or favor the employer.
Red flag language: This Agreement may be terminated by either party with appropriate notice.
What it means: The employer could terminate your contract without notice, and you might be responsible for expenses such as tail insurance, which covers malpractice after your employment ends.
Better language
Request equal notice periods for both parties (such as 90 days), clear definitions of termination terms, and a statement that the employer provides tail coverage.
Suggested language: Either party may terminate this Agreement at any time without cause by providing the other party with ninety (90) days’ prior written notice. Immediate Termination for cause may occur upon written notice, as defined in Section X. Upon termination, the (i) Physician agrees to assist with a smooth transition of care and complete necessary documentation and (ii)the Employer agrees to purchase an extended reporting endorsement to provide Tail Coverage.
Non-compete clauses and restrictive covenants
Restrictive covenants have become common in physician contracts. They include clauses for non-competition by the physician, non-solicitation of patients and non-solicitation of employees.
Non-competes prohibit physicians from engaging in the practice of medicine within a defined geographical area and time frame after they leave a job. To be enforceable, the non-competes must be reasonable. Learn more about non-compete clauses.
Non-solicitation of patients forbids you from notifying patients of contact information for your new practice, which can affect your ability to maintain continuity of care or rebuild your patient base.
Non-solicitation of employees prevents you from recruiting your colleagues (e.g. physicians, nurses and other staff) to join you when you leave the practice.
Red flag
The non-compete clause is vague or overly broad.
Red flag language: The Physician agrees not to practice medicine or solicit patients, employees, or referral sources of the Employer for a period of three years following termination, within a 50-mile radius.
What it means: You might be unduly prevented from practicing medicine in too broad an area and too long a time period. In addition, you might be forbidden from contacting former patients and colleagues. These restrictive covenants would then pose an unreasonable limitation on your ability to find another job or maintain your practice or referral network.
Better language
For the non-compete, limit the geographical distance and time period to a reasonable period of time such as for one year for five miles. For the non-solicitation of patients, negotiate for the practice to notify patients about how to contact you after your separation date consistent with ethical guidelines from the American Medical Association. For the non-solicitation of colleagues, limit the prohibition to colleagues currently employed versus employees previously employed by the practice.
Suggested language: The Physician shall not engage in the practice of medicine within a 5-mile radius of Physician’s primary office location for 12 months after termination of this Agreement. Physician agrees not to solicit employees of Practice and not to solicit patients seen by Physician during his employment with the Practice. Within 30 days of the separation date of Physician, the Practice agrees to provide patients of Physician with written notice of contact information about the Physician, including new office location and telephone number. These restrictions on solicitations do not apply to patients who independently initiate contact with the Physician.
What to do next: Take control of your contract and career
Highlight unclear or concerning elements. This will allow you to revisit them later and ask informed questions before moving forward.
Negotiate terms. It’s reasonable to shape the agreement so it supports your professional growth and long-term success.
Consult a mentor or legal expert. If you have concerns about contract language, discuss them with someone experienced in physician contracts before signing.
Take your time. This is a major decision that affects your professional and personal future.
Be ready to explore other opportunities. Don’t settle for a contract that limits your growth, financial security, or work-life balance.
You deserve a contract that empowers you. Be bold, informed, and confident as you take this important step.
Additional AAD resources
Employment guide: See our other resources on employment contracts and negotiation with employers.
Questions to ask a potential dermatology employer: Read expert advice on topics you should cover during the interview process.
Tips on improving your compensation package: Read DermWorld interviews with dermatologists on contracts and compensation.
This content was created with the particular needs of early-career dermatologists in mind. See the rest of our Career Launch resources for young physicians.
