When looking for your first job as a practicing physician after residency or fellowship, the focus is rightly on finding the fit that matches your physician career ambitions. While setting lofty expectations is commendable, experts say it also is wise to anticipate what will happen if there is a dispute with your future employer.
Before signing an employment agreement, physicians should be very careful about mandatory arbitration clauses, which are sometimes called “forced” arbitration clauses.
“Large employers like arbitration instead of litigation,” said Richard H. Levenstein, a health care lawyer and shareholder in the law firm of Nason, Yeager, Gerson, Harris & Fumero, in Palm Beach Gardens, Florida.
Levenstein counsels his physician clients to be aware of how mandatory arbitration might affect them. Forced arbitration in a contract is “a much more important clause than most people understand and give credit for.”
With all the complexities around employment contracts, including in forced arbitration clauses, physicians need an attorney on their side who is trained in health care law.
That’s why the AMA has partnered with Resolve to provide custom contract review and negotiation services to AMA members at a discount. Resolve specializes in reviewing physician employment contracts, so their team has the experience needed to help physicians secure the best contract terms at any career stage.
Ready to access your AMA-member Resolve discount? Learn more now.
The rise of arbitration in contracts
Arbitration is a dispute-resolution process that takes place outside of the traditional court system in which those involved select a neutral third party to hear both sides and come to a determination. The resulting decision, called an “arbitration award,” is legally binding and only rarely subject to court review or appeal.
If a contract requires arbitration as the first and only method of resolving disputes related to a physician’s employment, then all legal disagreements must be worked out in an arbitration forum. A 2018 survey of employers by Alexander Colvin, PhD, dean of the Cornell University School of Industrial and Labor Relations, found that more than half (53.9%) of nonunion private-sector employers had mandatory arbitration procedures. Meanwhile, nearly two-thirds (65.1%) of companies with 1,000-plus employees had such procedures.
As more physicians than ever before work in larger, multispecialty practice settings, they increasingly are being faced with employment contracts that require them to resolve disputes through arbitration only.
If you’re searching for your first physician job after residency, get your cheat sheet from the AMA now.
Watch out for the $100,000 arbitration
A long-running belief is that settling disputes through arbitration is always less expensive. While that can sometimes be the case, he said, physicians expecting the process to be more affordable often find themselves disappointed.
“It used to be touted as faster and cheaper than litigation. That's no longer true,” Levenstein said. “It's more expensive and takes just as long.”
Arbitration requires paying administrative and filing fees, as well as the cost of an arbitrator or arbitrators, who can charge hundreds of dollars an hour. Arbitration also might call for the hiring of expert witnesses and paying travel expenses to out-of-town hearings.
“An arbitration can cost $50,000 to $100,000 in costs out of pocket just for the fees for the arbitration forum and the fees of the arbiter,” Levenstein said. “That's an exorbitant amount for a young physician, or any physician for that matter, but it's nothing for an employer or a large employer.”
If physicians decide to sign a contract with a forced arbitration clause, they should pay close attention to what it says about costs, which party pays and when. If the physician winds up on the losing side of a dispute, they could be financially responsible for picking up the tab.
“The cost of the arbitration forum that administers the arbitrations and the arbitrators can be exorbitant,” Levenstein said. “Employers are in a much better financial position to pay, and they know that, which is why they put those clauses in the contracts.”
According to the “AMA Principles for Physician Employment,” last updated in June, “physician employment agreements should contain dispute resolution provisions. If the parties desire an alternative to going to court, such as arbitration, the contract should specify the manner in which disputes will be resolved.”
Arbitration vs. litigation
Physicians also should be aware that arbitration is unlike litigation in several ways.
“The rules of procedure [in arbitration] are completely different. You don't have the same evidence rules. You don't have the same procedural rules,” Levenstein said. “It's an entirely different forum, and arbitrators are not bound to rule by the law, meaning that even manifest disregard of the law in a decision by an arbitrator is not grounds for appeal.”
Another key difference is that the arbitration process is private, unlike court proceedings, which are open to the public. Levenstein said large organizations, especially, appreciate arbitration’s confidentiality.
“It's not in the public record,” he said, “There's never any coverage of it [the dispute] because there's nothing in the public record anywhere.”
For Levenstein, the choice in comparing the two is clear.
“I'd rather be in a court of law any day where I know a judge or a jury is going to make a determination that the rules of civil procedure and the rules of evidence are going to apply, and that I'm going to have appeals in the event that there is an adverse result,” he said.
The AMA has assembled a variety of resources to help physicians flourish in the employment setting. They include the Annotated Model Physician-Group Practice Employment Agreement (PDF) and the AMA Physicians’ Guide to Hospital Employment Contracts (PDF), free for AMA members.
How to sidestep arbitration quicksand
There is a third option for dispute resolution: mediation, which is faster, less formal and cheaper than both litigation and arbitration. It is not legally binding, however.
Levenstein said avenues exist for lessening the impact of particularly burdensome mandatory arbitration clauses.
“What I try to do is have a clause that says that the parties may agree at the time that the dispute arises to submit the dispute to binding arbitration,” he said. “And then I also try to make it so that the employer is responsible to pay all of the cost of the arbitration if arbitration is agreed upon when the dispute arises.”
Ideally, the contract preserves the option of arbitration but does not require it.
In that case, the choice is left until the dispute arises, “and the physician doesn't have to go through an arbitration and can file suit” if they would prefer.
Explore further with the AMA STEPS Forward® toolkit, “What to Look for in Your First or Next Practice: Evaluate the Practice Environment to Match Your Priorities.” It is enduring material and designated by the AMA for a maximum of 0.5 AMA PRA Category 1 Credit ™.
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