Contracts the basics every doctor should know

The good news is that most agreements and contracts are not as overwhelming as they seem at first glance.

Doctors study medicine, not contract or employment law. So it isn’t surprising that contracts appear to be written in a whole different language. You should never sign a contract before you have read it, understood it, and asked questions about anything you don’t understand. Remember, the main objective is for both parties to reach an agreement as to the terms of the arrangement to avoid disputes down the track.

For those practitioners entering contracts or agreements as independent contractors with the practice entity providing support services to them, there are some key aspects to consider and look for in the written agreement.

Parties to the contract should be clearly identified

The practice corporate entity should be clearly identified. This is not usually the name the practice is known by in the community, but a Pty Ltd that owns the business and has an ABN. Similarly, if you have your own service entity under which you work, then it too should be clearly identified, and the ABN noted.

Term or duration of the contract

Is the commencement and end date clearly identified, or is there no set end date? Many contracts are intended to be ongoing, with reasonable options for either party to terminate the contract according to the terms agreed. Other contracts may identify a period of time over which they run, or a maximum timeframe before review, but still allow for termination. In some instances, we see fixed-term contracts with a set period of time, but no option for early termination. This isn’t generally ideal, as it doesn’t allow for unforeseen life events that might require flexibility.

The practitioner’s obligations

Most contracts document what’s expected of the practitioner – and most of these expectations mirror aspects of the Medical Board’s Code of Conduct – but keep an eye out for any unreasonable expectations that may require further negotiation.

The practice’s obligations

The contract should clearly list the range of services the practice will provide. Think about the things that allow you to practise safely on a day-to-day basis – including administrative support, reliable software, a suitable consulting room, and nursing services. It’s also important that you’re able to request regular billing summaries, to allow you to review what has been billed under your provider number.

Payment arrangements under the contract

Where the income from your billings is paid – the practice account, your own account or a trust account – should be clearly set out in the written agreement. The transaction cycle should also be clearly stated, i.e. every 7 days, 14 days, etc.

Hours of work and periods of leave

If you’re independent and not an employee, you should have the freedom to decide what hours you work and when you take leave. However, it’s a reasonable request that there be an agreement upfront regarding the working hours and planned leave timeframes, to enable the practice to run efficiently. Think about your objectives and needs. Ideally, there should be room to change hours by mutual agreement if it becomes necessary in the future.

Medical records, storage and ownership

The contract should specify who owns the medical records. This is important, not only for the management and upkeep of the medical records during your time at the practice, but to ensure the exit arrangements are clear going forward. It’s often presumed the records belong to the practice, unless otherwise specified.

Confidentiality

Most contracts include reference to current privacy laws, but often go further to protect any operational or trade secrets. As you would expect, it’s reasonable to be asked not to divulge any confidential corporate information that’s not publicly available.

Taxation elements

An independent contractor is responsible for their own tax as a starting point. As with many things, the taxation aspects of a contract have become more complicated as the years have gone by. We recommend you discuss the taxation clauses with your accountant, particularly with respect to superannuation, GST, and (depending on the state you work in) any potential payroll issues.

Insurances required

Contracts often refer to the insurances that each of the parties are required to hold. This may include professional indemnity (which both parties should hold) and public liability insurance. While you’re not legally obliged to hold public liability insurance as a contractor, if you sign a contract agreeing to do so, you should ensure you meet this obligation.

Restraints or restrictions

Restraints of trade are becoming less common due to their effect on certain taxation elements. However, if the contract you’re considering signing includes a restriction on your activities, either during or after termination of the contract, then you need to read it carefully and ensure you understand the potential consequences. If the clause is reasonable, it’s likely to be enforceable – but the parties should discuss this and agree on a position before the agreement is signed.

Termination clauses

Unless the contract is for a fixed term without an early termination option, it should clearly set out the rights of the parties to terminate. Most often, in the first instance, there should be a mutual right to terminate without cause (in other words, without needing to identify a reason) by way of a minimum timeframe in which written notice must be provided. This can range from anywhere between four weeks to six months. Think about what works for you and the practice. There will also usually be a list of events that, if they occur, will result in immediate termination. The right to immediate termination is generally limited, but this should be clearly set out in the agreement.

The above information will hopefully take some of the confusion out of the contract process, but if you are concerned about any aspects of the agreement or the arrangement overall, we recommend you seek advice from a lawyer and/or a tax accountant.

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