| Read Time: 4 minutes | Healthcare Business Law

Over the years, doctors signing physician employment contracts with small practices has become increasingly commonplace in Texas.

Physician Employment Contract

Retaining a physician employment contract attorney’s services to identify the obligations and expectations of either party to physician employment agreements can minimize future disputes. 

For assistance, please don’t hesitate to contact our firm online or call (512) 410-0343 today.

What Is a Physician Employment Contract?

A typical physician contract agreement dictates the relationship between a physician and their employer.

These employment contracts provide provisions outlining the terms of employment, such as compensation, job requirements, benefits, termination, non-compete clauses, and professional liability insurance. The terms of all physician employment contracts are negotiable and ensure the final agreement is fair to both parties.  

Important Terms in a Physician Employment Contract

There are several typical provisions you should consider when drafting a physician employment contract.


Physician employment contracts can specify the length of time the physician will provide services for your healthcare business. Additional terms may address other considerations relating to the duration of a physician employment contract, such as  whether the term can be automatically renewed or what notice is required for cancellation.


Ensure that the contract includes a detailed description of the expectations of the physician.

This may include details such as

  • The type of medicine the physician will practice,
  • The number of hours the physician must work each day or week, and
  • The physician’s on-call obligations. 

It may also address whether you will expect the physician to undertake outpatient care or administrative duties.


What will be the compensation for the physician you hire?

Compensation elements in physician employment contracts may cover a few areas.

Base compensation 

Base compensation is a guaranteed salary. However, base compensation is a negotiable element of physician contracts. Negotiations regarding base compensation must always consider state and federal compliance, industry pay standards, and inflation if the contract reflects multiple employment years.  

Productivity incentives

Productivity incentives base compensation on productivity. These types of incentive clauses in physician contracts must include a clearly defined productivity formula for calculating payment. Productivity measurements must consider the equitable scheduling of patients and not negatively impact the quality of patient care.


You may include benefits in your physician employment contract or agreement, such as:

  • Retirement, 
  • Health insurance, 
  • Disability, 
  • Reimbursement for travel or continuing medical education, 
  • Paid time off, 
  • Vacation, and 
  • Sick pay. 

Depending on the physician you plan to hire, you may wish to include these types of benefits in your physician employment contract.

Other benefits

Other types of bonuses might include student loan reimbursement, reimbursement for relocation expenses, severance pay, and many others. These types of benefits may incentivize employment with your healthcare business. 

Buy-in clause

Buy-in clauses provide physicians the opportunity to buy into your business. Determining whether or not to include this type of clause in your physician employment contract requires careful consideration of employees’ buy-in parameters and requirements. 

Physician employment contracts may vary; however, clearly defining compensation details assures clarity between you and your employee. 

Termination Rights

Every contract should include a termination clause outlining the terms and conditions of terminating employment. For example, early termination may be permitted “for cause” or “without cause.”

Circumstances prompting early termination may include:

  • Revocation of medical license, 
  • Malpractice, 
  • Drug use, 
  • Violations of the physician contract, and 
  • A felony conviction. 

Additionally, without-cause provisions may provide that either party may terminate the agreement if sufficient notice—for example, 60 days—is provided. 

Professional Liability Insurance

Typically, the employer will insure the physician employee with professional liability insurance.

Professional liability insurance considerations to address in the employment contract might include the following:

  • Type of insurance,
  • The amount of coverage, and
  • Whether coverage continues after the physician leaves employment. 

Since both the employee and the physician are liable to a patient, carefully review professional liability insurance obligations. 

Non-Compete Clause

A non-compete clause in a physician employment contract limits an employee’s ability to work elsewhere after employment termination.

Special conditions exist for valid non-compete clauses in employment contracts, including the following: 

  • They must be limited to a reasonable geographic area; 
  • The scope of the restrictions must be reasonable; and
  • Their applicability must be limited to a reasonable time frame. 

An experienced business law attorney provides industry-specific guidance on non-compete clauses in physician employment contracts. 

Dispute Resolution

While disputes between parties to a contact may resolve in court proceedings, you may consider including an arbitration clause in your physician employment agreement. Arbitration is generally a less expensive and more efficient resolution to disagreements than litigation. An experienced healthcare business attorney can help you determine whether an arbitration clause is appropriate for your physician employment agreements. 

Why Should Employers Have Their Contracts Reviewed? 

Retaining a skilled business attorney’s services to review your physician employment contract protects you and your business. Failure to properly identify responsibilities and obligations in a physician employment agreement can result in disagreements and, potentially, litigation. 

It’s important to critically analyze compliance with federal and state laws to prevent exposure to potential violations.

Also, an attorney may provide insight as to the following areas: 

  • Fair market value compensation, 
  • Creating and reviewing compensation plans,
  • Non-compete clauses, and
  • Dispute resolution and litigation. 

The attorneys at Massingill ensure you create a comprehensive physician employment contract protecting your business interests and interests. Employers need to address these and multiple other issues regarding physician employment contracts before offering an employment contract. 

Why Massingill? 

The attorneys at Massingill possess extensive experience in business and healthcare law across Texas. We understand the expense and stress resulting from a weak contract. That’s why we draft rock-solid agreements for our clients, protecting you and your business from future litigation. Additionally, we revise existing contracts and review new contracts to remedy gaps in potential liability. 

Massingill provides superior legal services to clients for reasonable fees. We understand how important your business is to you. Contact us today or call our firm at (512) 410-0343 to discuss questions regarding your physician employment contract.

Author Photo

Joshua Massingill

Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.