Read the Fine Print

A number of people have recently discussed their veterinary employment contracts with me. I have previously written about contracts and I have also presented webinars on the subject. While I am not an attorney, my recent discussions reinforce that veterinarians must carefully READ THE FINE PRINT.

Here are ten things for veterinarians to ask about both new contracts and contract revisions.

1) What is included in production?

While most base + production contracts list a base pay and a single production percentage, there are often items that are either paid at a lower percentage OR not included at all in production. Items that may be paid at a lower percentage include pharmacy or expensive laboratory items with a lower mark up. Items not covered in production may include food, prescription refills, or in specialty hospitals, nursing care. My first job gave me a very detailed production schedule of the exact percentages paid for each inventory category. Unfortunately, not all contracts include a listing of what is excluded from production.

While on the surface, small deductions might seem inconsequential, they do decrease your pay even with no change in what you charge clients or how many patients you see.

Salary with monthly production by The Veterinary idealist — Example of pay with a base salary and production paid monthly.

Base Salary with monthly production but not all items included for production pay by The Veterinary idealist — Same example as above but this time not all charged items are counted as production for purposes of pay calculations

2) Can items included in production change without notification?

The fine print of many contracts state that items included in production can change AT ANY POINT and without notification. This means that potentially a whole category of charges could be changed and you would not be notified. A likely time for this to occur is when a consolidator switches the new practice to a new software system. Because the inventory items are different and production percentage can be set in the background, you may not even realize that your effective pay percentage has been decreased.

3) How often is production paid?

Employees are better off the more often production is paid, while employers would rather pay production less often. A change in the time frame when production is paid can influence your overall take home pay.

Base Salary with quarterly production but not all items included for production pay by The Veterinary idealist — In this example, production is calculated and paid quarterly, rather than monthly.

4) Is there negative accrual?

Negative accrual means that if your production is lower than your base salary, you develop a negative “account balance.” If you end up taking a vacation and aren’t generating revenue, you could end up “negative” and then take a long time before you can get back over your base salary. The fine print you need to understand includes whether negative accrual starts day one or do you have a year to build your skills or your client base. You also need to do know whether the negative balance ever resets. Another question is whether maternity or paternity leave that uses vacation time could put you into negative accrual for that time period.

Base Salary with quarterly production and negative accrual by The Veterinary idealist — If negative accrual is part of the contract, if you make less than your base for a quarter, that negative amount has to be covered before any positive will be paid.

Salary_with a high base and negative accrual by The Veterinary Idealist — If production is unchanged and you negotiate a higher base, you simply carrry forward a higher negative balance.

5) How are 24-hour charges shared between shifts?

If you are a specialist or an emergency doctor working after hours and you are paid on production, you need to understand how charges are allocated. If hospitalization is charged in 24-hour blocks but only assigned to the specialist, the emergency doctor at night may not be compensated for overnight care. Changing the way charges are entered during a practice transition can have consequences for pay.

6) How large and long is my non-compete?

As I have discussed before, I believe non-compete clauses decrease options for veterinarians AND decrease choice and options for pet owners. One reason for the lack of available veterinary emergency and specialty services in Seattle is non-compete clauses. In dense cities, a 10 mile non-compete radius can lead to a burdensome and potentially undoable commute. If the non-compete is written to have 10 miles around multiple hospitals in a group, the veterinarian may have to leave the area to find work.

The human American Academy of Emergency Medicine (AAEM) opposes the use of ANY non-compete clauses in physician contracts. They believe, “The threat of termination from a hospital medical staff, as well as a restrictive covenant, may prevent physicians from advocating for their patients if the hospital or contract holder opposes such advocacy.” The Emergency Medicine Residents Association also has a written policy brief opposing these contract clauses.

Washington state passed a law in 2019 that limited non-compete clauses. If you work in Washington and you are asked to sign a new non-compete provision, you must be provided “new independent consideration for the covenant.” This might be additional compensation, new benefits or a promotion. If a court finds that a non-compete clause in a contract violates the law, statutory penalties may be applied against the employer.

7) What types of business and activity are included in my non-compete?

If you know that you can not move and you need to sign a non-compete as part of your contract, it is important to know EXACTLY what is prohibited. If you are in a primary care practice with a 5 mile non-compete, could you work in an urgent care or emergency clinic instead? Could you be a practice consultant? A practice investor? Teach at the local technical college? Think about your back up plan. Make sure the fine print allows you to pursue that plan if you decide to leave your job.

8) If I work a shift in another partner practice how does that impact my non-compete?

Veterinarians often want to be helpful and may also want pay from extra shifts. Thus, it might be appealing to help another area hospital that is part of your group. However, you need to read the fine print before agreeing to do this. Often there is language in the non-compete that says the radius is around ANY hospital where you have worked. Sometimes it is based on working for more than a certain number of shifts per month. Before you agree to help, know HOW MANY shifts triggers the non compete around the additional hospital.

9) Are my benefits guaranteed or subject to change?

I am seeing more contracts with significant non-compete clauses but offers that say “benefits are subject to change”. This gives the business flexibility to negotiate for insurance and other benefits. However, it is also a risk for you, as the employee, if your employer choses to cover less. Benefits are a crucial part of compensation so you need to understand the fine print.

10) If I am offered a signing bonus, when is it actually paid?

Veterinarians are currently in short supply and employers are using signing bonuses as an incentive. These can be a great cash source but it is again important to understand the fine print. Often, you are not actually paid the bonus at signing but at some date in the future. Some are based on company profits and the numbers shown are the very best case scenario.

As our industry becomes more dominated by financial players, the contracts are likely to become more complicated. I strongly recommend having any contract or revision reviewed by an attorney prior to signing. Read the fine print and watch specifically for these ten issues.

Read the Fine Print