Healthcare Services Litigation (Provider Disputes)

An Overview

Because licensed healthcare professionals face stricter regulation and heightened legal scrutiny than their counterparts in most other industries, contracts between healthcare professionals and their employers take on a higher level of complexity and importance. Not only do healthcare employment contracts address many of the traditional legal issues that arise generally in the employment setting, but they also address a host of other, healthcare-specific issues that increase the chances of disagreement and, ultimately, litigation between healthcare employers and employees.

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Representative Matter: DBS attorneys successfully defended a long-term healthcare facility in an arbitration over its termination of two union employees.

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In general, most employment litigation arises at the conclusion of the employment relationship, thereby making it more likely that the parties will be particularly combative. This not only increases the likelihood of one party pursuing employment-related litigation against the other, but it likewise may intensify the emotional commitment to prosecuting or defending the lawsuit either (or both) of the parties may have. This general principle remains true in the healthcare setting, and for that reason it is not uncommon to see former healthcare employees initiating “traditional” employment litigation against their employers for things like discrimination, retaliation, or other wrongful termination and whistleblower claims. But because healthcare employment contracts address so many other, often unique, topics that employment contracts in other industries do not, there are many other types of disputes that are ripe for litigation not only at the conclusion of the employment relationship but also during its term. Some examples of these, often-healthcare specific litigation topics include:

• Litigation over whether, and to what extent, a healthcare employer will (or is required to) conduct peer review activities of its employees, and the potential consequences of such peer review on a given employee’s reputation, license, or right to practice;
• Litigation over whether the healthcare employer or employee maintains control of patient records, both during the employment and also at the end of it;
• Litigation over whether, and to what extent, a healthcare employee can pursue other professional opportunities within the medical community during the course of the employment (e.g., “moonlighting”); and
• Litigation over the calculation of a healthcare employee’s compensation, most commonly a bonus that is, through the employment contract, tied to the employee’s productivity or patient origination.

In addition, depending on the jurisdiction, another common topic that can lead to employment litigation between healthcare providers and their employers (or, more likely, former employers) is over the enforceability of non-compete clauses. Generally, non-competition clauses that are written into employment agreements are enforceable so long as they are reasonable in scope. However, the rules can be quite different with regard to healthcare employment agreements. Some states (for example, Massachusetts) have enacted laws that render non-compete clauses for certain healthcare professionals (in Massachusetts, physicians, nurses, and social workers) void as a matter of law. But in jurisdictions that do permit enforcement of non-compete clauses, litigation will often arise when the employer is unwilling to waive a non-compete clause and the departing physician seeks to invalidate it on the grounds that it is overly restrictive in length or geographic scope. Because this type of litigation often involves parties who are in direct competition with one another, non-compete lawsuits can be very adversarial from the outset as the parties debate issues like: (i) the merits of the clause’s term and scope; (ii) whether enforcing the clause will ultimately harm patients and, therefore, violate public policy; and, (iii) whether there are any circumstances surrounding the physician’s departure that support or weaken the enforcement of the non-compete clause (e.g., if a physician is unfairly terminated a court may be less likely to enforce a non-compete).

With so many moving pieces involved in healthcare employment contracts, a certain amount of litigation between employers and employees is inevitable. As disputes arise, both sides will be presented with opportunities to initiate litigation that could be in their benefit. Accordingly, both employees and employers can benefit greatly from counsel who has experience with healthcare law and traditional employment litigation.

Kelly McGee and Callan Stein prepared this overview.