Independent contractor vs employee
Being a principal in your own medical practice is becoming increasingly rare. In its place many practitioners are either engaged as employed doctors or independent contractors by corporate entities providing medical services to the public.
An independent contractor is a person, business or corporation that enters into a written or oral agreement to provide goods or services to another entity that is not their employer and where their payment depends on fulfilling their contractual conditions. Distinct from an employment arrangement, independent contractors are not afforded the various legislative entitlements which employees receive such as maximum weekly hours, paid parental leave, annual leave, personal leave, long service leave, public holiday and redundancy pay, workers’ compensation cover and superannuation payments.
In recent times we have seen an increase in disputes around the terms of independent contractor agreements, including disputes which have arisen in the absence of a formal agreement.
You might be faced with a scenario where a contractor leaves your practice without providing any notice, ‘sets up’ in direct competition and solicits your patients. Conversely, you may be a contractor who has been rostered to work excessive hours in a day and night practice. These are just a couple of examples.
Disputes such as these can have significant financial and personal consequences no matter who you are in the contractual relationship. With a robust agreement and independent legal advice many of the pitfalls which can arise in the absence of a clearly worded contract can be avoided.
Is the contract right for you?
While independent contractor arrangements are treated as distinct from employment contracts, the requirements are sometimes analogous, stipulating hours of work and how they will be worked across the week, conditions concerning taking of leave etc.
Before entering into a contract of any type, it is important to review its terms. Once entered into, the terms will be binding and direct the relationship between the parties to the contract.
It is important to satisfy yourself that you understand the impact of each term and seek advice on any areas of concern. It is best to talk to the person you are contracting with to ensure there is clarity. This will help safeguard against unforeseen problems which may arise in the future.
Some of the key contractual terms which need to be clearly expressed and understood in the contract include:
- Services delivered by each party
- Notice periods
- Ownership of medical records
- Restrictions on practice post termination (restraint of trade)
- Leave entitlements
- Basis of remuneration.
Restrictions on practice post-termination
These are also known as ‘restraint of trade’ or ‘non-compete’ clauses. After a contract is terminated, either by reaching the end date or in accordance with its terms, regard should be given to any term in the contract which imposes ongoing restrictions on where the contractor can practise medicine.
This type of clause can create issues from the contractor’s perspective depending on the radius in which the contractor is prevented from practising and the period of time in which they are required to honour the ‘non-compete’ clause.
Before entering into a contract it is important to understand the effect of any ‘restraint of trade’ clause and assess from a practical perspective the impact should the agreement come to an end. A breach of this clause can result in significant financial and emotional cost and also expensive and time consuming litigation.
Make sure before you enter into a contract you have done your homework on the other party. You will want to be sure that there is going to be enough work to keep you busy and to meet your financial needs.
Another issue some of our members have raised is the tension between the commercial needs of the practice in terms of billings and patient ‘turnover’ and a practitioner’s view and capacity to provide for quality health care. If you are engaged as an independent contractor, medico-legal liability may primarily rest with you as the doctor.
There are many considerations to be taken into account when entering into a contractual arrangement.
If you are unsure about the terms of an agreement or whether certain conduct may be in breach of an agreement, please contact one of the solicitors in the Claims and Legal Services Department.