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Physician Employment Contracts

Is your employer paying you everything you are legally entitled to?
By Steven R. Greenberger, Esq., and Katherine Schostok, Esq.

With the increasing consolidation in the healthcare industry, physicians more and more often find themselves employed by large healthcare providers rather than operating their own practices. These providers typically require their physician-employees to sign employment contracts that the providers prepare. Perhaps not surprisingly, the contracts are generally one-sided and redound to the benefit of the providers. But not only do the contracts favor providers, they sometimes violate Illinois law—in ways that serve to deprive doctors of compensation to which they are lawfully entitled.

The typical physician employment contract provides that a physician’s compensation is determined via a formula. The formula generally consists of a variety of metrics, such as productivity, utilization management, accessibility and patient satisfaction. Physicians are awarded a score on each of the specified metrics from which their compensation is calculated.

The Illinois Wage Payment and Collection Act (the “Act”) provides that professional employees (including doctors) are to be paid at least monthly. The Act further provides that employers must pay their employees all compensation earned during the prior pay period within 21 days after the period ends. In addition, in the event that employees cease their employment, they must be paid all compensation due them no later than the next regularly scheduled pay period after their employment ends.

Faulty Formula Calculations

Providers are prone to violate the Act in several ways. First, they frequently do not calculate the scores on some or all of the metrics in the compensation formula on an ongoing basis. Instead, they perform only a single, annual calculation at the end of a calendar or fiscal year. In that event, doctors must wait until the employer performs this calculation in order to be fully paid for work performed many months before, contrary to the law.

Second, and more egregiously, providers sometimes do not perform even this annual calculation until long after the calendar or fiscal year ends. In some instances, they wait an additional six or eight months after year’s end to calculate and pay the compensation their doctors are due. Depending upon the portion of a doctor’s compensation attributable to metrics that the employer delays calculating, the amounts withheld could easily run into the tens of thousands of dollars yearly.

Finally, and most seriously of all, some providers not only delay paying their doctors for months, they include provisions in their employment contracts requiring that a doctor still be in their employ on the date that the delayed compensation is actually paid in order to receive it (no matter when it was earned). By way of illustration, assume that a doctor worked all of calendar 2015 and that 20% of his compensation is determined by his utilization management and patient satisfaction scores. The employer calculates those scores once for a calendar year (the period from Jan. 1, 2015, to Dec. 31, 2015). It performs that calculation and pays the resulting compensation some time in 2016, perhaps not until July or August.

Assume further that the doctor takes a position somewhere else in early 2016, before the compensation is calculated and paid. In that event, citing their contracts, employers are claiming that the doctor has forfeited his or her right to the 20% of compensation for 2015 attributable to utilization management and patient satisfaction, even if there is no dispute that the doctor did everything necessary to earn it. This last employer practice, in particular, is manifestly unfair and clearly violates the Act.

Employee Recovery Rights

The recovery available to an employee whose rights under the Act are violated is significant. In addition to receiving unpaid compensation, an employee is entitled to recover 2% of the unpaid amount for every month that it was not paid. Moreover, the statute of limitations under the Act is ten years, so depending upon the length of time that has elapsed, doctors whose compensation was wrongfully withheld could easily see the amount due them double or triple. (Indeed, the State of Illinois has deemed it so important that employers comply with the Act that an employer, or anyone acting on its behalf, who violates it is subject to potential criminal prosecution.)

If you are a doctor and do not get paid all of your compensation until long after the period in which you earned it, particularly if you are now working elsewhere, please be aware that the Illinois Wage Payment and Collection Act affords you significant rights.

Steven R. Greenberger, Esq., is a professor at DePaul College of Law specializing in labor and employment law and consults with physicians in employment matters. He can be reached at Katherine Schostok, Esq., is the executive director of the Mary and Michael Jaharis Health Law Institute at DePaul.


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