BRIEF REPORT

Employment Contracting Basics for the

Nurse Practitioner
Lorie A. Brown, JD, MA, and Carolyn Dolan, JD, MSN

ABSTRACT
Finding the right position is a goal of every beginning nurse practitioner. After many long hours of study
and clinical to achieve an advanced degree, the postgraduation pay-off is entering into advanced practice.
Although the new nurse practitioner is anxious to join the nearly 200,000 already in practice, taking the
time to weigh essential contract negotiation strategies before entering into an employment contract may
prevent the dream of a perfect position from becoming a night terror.

Keywords: alternative dispute, arbitration, employment-at-will, fee for service, independent contractor,
mediation, negotiation, productivity-based salary
Ó 2016 Elsevier, Inc. All rights reserved.

INTRODUCTION trends and responsibilities; how they will maintain

E mployment contracts offer many protections geographic proximity; and how they will provide
for nurse practitioners (NPs). Although they coverage during an absence, incapacity, infirmity, or
do not guarantee the perfect employment emergency by the licensed practitioner.
match, they minimize conflict(s) after hiring by An employment contract legally means a
putting the provisions “on the table” up front. For “promise for a promise” and frames the structure,
example, many states fall under “employment-at- limits, and expectations of the working relationship.
will” provisions of law and, therefore, an employee Therefore, it is paramount that its terms and condi-
may be terminated for no reason at all. However, tions are clearly understood and agreed to by both
an employment contract, if offered, provides parties. Because the NP will be giving “their” word
specific protections IF its terms are properly (promise) to perform or make good on their end of
negotiated. the employment bargain in expectations and condi-
The American Association of Nurse Practitioners tions as outlined by the employer, all essential legal
estimates there are nearly 200,000 licensed NPs in the terms and obligations must be comprehended.
United States today.1 The majority of NPs are in the Would anyone agree to do something without un-
workforce and many will utilize employment derstanding what is expected? Accordingly, an NP
contracts. Although some contracts are casual, agreed should not agree to any of the terms of an employ-
to verbally or by a handshake or a wink and a nod, an ment contract that is not understood completely.
employment contract is a legally binding document Therefore, the first caveat is: Understand the terms
signed by the parties involved. It is constructed by and conditions before affirming. There should be
specific terms of employment and memorialized in no surprises.
writing to delineate the responsibilities and rights of In most cases, the employer and his/her attorney
the parties. draft the initial employment contract and the NP
Employment contracts are different from collab- then reviews the contract and suggests changes in any
orative practice agreements. Collaborative practice of its terms. When there is mutual agreement, the NP
agreements are required by states in which NPs signs the contract. With this in mind, it must be
cannot practice independently. Collaborative practice realized that employment contracts are written by
agreements usually address how the physician and NP employers’ attorneys. Who looks out for the NP’s
will work together; how they will share practice best interests? Often, no one is assisting or supporting

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the NP in the process. The recommendation to an contractor, the NP will be responsible to pay
NP is to hire legal counsel to review the employment their own taxes and may also be personally
contract. Counseling should be provided to the NP liable for any malpractice. Physicians may prefer
along with negotiation on the NP’s behalf to ensure a that NPs be hired as independent contractors
better outcome. for tax and liability purposes, but the terms of
Generally, an attorney with experience in the contract must be carefully construed for
negotiation, contracts, business and health care, this to stand if a question of authority arises.3
or employment law is recommended. An In cases of dispute, the court would look to
employment contract has been compared with the nature of the relationship between the
marriage—a solid marriage takes time and effort.2 professionals to determine whether the NP was
Instead of being swept away in the heat of passion truly independent or in an employee-employer
of pursuing an exciting career opportunity, the NP situation. Other indications of the true
must think through each contract requirement, employment status can be determined by how
listen to counsel from their attorney, and know the NP is paid (salary, fee for service, incentives,
that with due diligence they can sign on the productivity). A fee-for-service payment struc-
dotted line with confidence. A slight delay in ture is based on payment for quantified or
getting to work is much better than the frustration itemized treatments and not bundled care and
and cost of breach. is typical of an independent contractor agree-
Breach is a legal term for failure of one of the ment. In those cases in which there is a question
parties to a contract to fulfill one or more aspects of as to whether the NP is an independent
the “promises” or “conditions” of the contract as contractor, courts consider such factors as the
agreed. The NP may have little recourse if a problem amount of control the NP has over the type of
occurs and could be forced to pay the employer, work performed, the workplace setting, hours,
which is called indemnification, for a claim against schedule, and benefits. The more control the
them. The NP may also be charged legal fees asso- NP has over these elements, the more likely a
ciated with contract issues (attorney, court, filing fees) court will determine that he/she is an inde-
or could be forced to complete the employment pendent contractor and not an employee. In
obligations (performance). In most cases, the NP will questions of status or other matters, the words of
not be in a position to pay the employer’s costs for the contract are carefully weighed to determine
the damages (another legal term for losses converted what the parties intended.
to payment in money). Breach of contract has been 2. Services. It is important to know what services
compared with a bad divorce, as it can end in legal the NP will be providing and how frequently
costs, excessive amounts of time lost, and personal the NP will see patients. For example, if the
stress. Preventing breach is most likely if the NP NP is expected to see patients every
employment contract (hence referred to as the con- 10 minutes, but knows that they will need
tract) is well constructed and well comprehended. 15 minutes to do an adequate job of assessing,
There are several sections of a contract. The NP planning, intervening, and evaluating patients
should understand each section to negotiate the and providing thorough documentation, the
best outcome. specific terms may need to be renegotiated in
the contract. The NP needs to understand the
SECTIONS OF THE NP EMPLOYMENT CONTRACT health care expectations of the patient popu-
1. Status. First, the NP and the employer must lation: Will the NP’s actions be supervised by
agree that the contract is an employer-to- a physician? Will the physician do the initial
employee contract and not that of an inde- work-up and the NP the follow-up? If the
pendent contractor. When an NP is hired as an patient population requires in-depth care, will
employee, the employer will deduct taxes from an NP be able to perform an extensive assess-
their paycheck. If an NP is an independent ment and have adequate time to implement

e46 The Journal for Nurse Practitioners - JNP Volume 12, Issue 2, February 2016
 appropriate recommendations? A suggestion 3. Salary. There is a lot of variability in salaries and
toward achieving a better understanding of the salary structure. Asking how the salary is
agreement (contract) is to have a clear job derived is important for avoiding unnecessary
description. It has been suggested that the anxiety. The NP should ask how, how much,
NP include a copy of a professional NP job and when payments will occur. He/she must
description with his/her resume. The Amer- be absolutely certain that salary terms are un-
ican Association of Nurse Practitioners provides derstood. An NP may be given a set salary
downloadable information on their website (eg, every pay period) or a salary based on
(https://www.aanp.org/all-about-nps/what- productivity, where compensation is deter-
is-an-np), which the employer may review if mined by revenue. Such productivity-based
needed. employment compensation terms are generally
Contract terms will contain a starting date for not recommended, particularly for the new
beginning employment, but it should also be NP, because of the risk of fluctuation in in-
determined when the NP is to assume full come. However, if the NP is considering a
responsibilities. The NP must determine contract that includes productivity-based salary,
whether there will be an opportunity to he/she must ensure that it address experience,
become acclimated and familiarized with the expense of benefits, overhead, and past pro-
organization. Before signing the contract, the ductivity.5 In constructing the terms of this
NP should attempt to determine as many day- type of contract, it is best to base salary on
to-day details about the practice environment as what is billed (charged) not received (collected),
possible. For example, some practices expect an because an NP has no control over the
NP to see 8-12 patients per day, whereas other collection practices of the employer. Further,
practices may expect an NP to see twice this the NP cannot change her/his billing to
number for the same salary. The savvy NP will improve reimbursement, as doing so may
ask what the expectations are regarding patient constitute fraud.
volume. In addition, he/she will ask what Sometimes NPs will accept a lower salary
happens if they exceed the expectations and if with a bonus every quarter based on a percent
they do not. Particularly in the first few months of collections. This is another form of a
of practice, when many NPs are inexperienced, productivity-based salary. In this example,
slow, nervous, and unsure, will a learning curve the NP accepts a small monthly salary and a
be allowed? Will the new NP receive an quarterly variable bonus. The NP must
orientation? If so, who will orient them and for consider whether waiting for a lump sum while
how long? Will it be structured? Are there not receiving a paycheck would impose an
policies and procedures? undue strain to an otherwise manageable
One very important consideration is whether budget. When the salary is based on what is
there is an electronic medical record system and collected, the NP must also consider whether
whether the NP will be allowed to spend some there will be a guaranteed minimum collection
time becoming familiar with the billing pro- rate or, if the collections are low, whether there
cesses of the organization. There should be a will even be a bonus. The NP needs to
reasonable amount of time to allow the NP to understand explicitly how bonuses will be
become accustomed to both the recording and distributed. Will bonuses be split if there is
coding/reimbursement systems in use due to overage? If so, what will the percentages be?
the inherent accountability and liability. The When there is a bonus for productivity, the
NP needs to understand the financial structure NP needs to know how it will be calculated.
of the practice, the payment system, and the NPs must carefully analyze the advantages
practice’s EMR system to limit liability and and disadvantages of different salary structures
ensure best practice.4 before accepting productivity-based salary

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 terminology in the contract due to the impact recertification classes for their providers to
of billing practices and effective collections. ensure that these remain current.
If an NP is an independent contractor, he/she  Will the employer cover part or all of continuing
should inquire as to who pays for equipment, education costs? Some practices may be willing
staff support, equipment, supplies, malpractice to absorb the costs of continuing education
insurance, and continuing education. Will this as a tax-deductible business expense. In
be done by deductions from the NP’s salary or other cases, the NP may elect to pay for
will the practice provide them? In addition, the such costs and reap a personal deduction.
NP should know whether there is a contractual  Is tuition reimbursement for a specified term of
obligation for regular salary negotiations. If so, service available, or a possibility? Some larger
new advanced practice registered nurses may organizations, hospitals, and community
elect to accept a smaller initial salary with a health centers have a vested interest in their
provision for renegotiation of the contract after providers receiving higher education and
a specified term of employment (eg, 6 months may offer tuition reimbursement or partial
or 1 year). academic support as part of their benefit
4. Continuing education/documentation/Quality package. In addition, some health centers
Improvement. The NP should ask how much may be state or federally qualified to receive
continuing education is allowed annually and loan repayment for providers with a long-
whether there is a regularly scheduled time for term service commitment through such
the review of labs, X-rays, and other diagnostics programs as the National Health Service
to ensure proper follow-up and accurate docu- Corps or similar programs. The agency’s
mentation. The answers to these questions manager or chief executive officer would
are sometimes strong negotiable points. For assist the provider with the separate applica-
example, consider the desirability of an after- tion process.
noon off once a week to do billing, QI, and/or  Will the NP be given release time for education/
office follow-up (eg, mammograms, biopsy documentation/Quality Assurance? If a practice
reports, X-rays, diagnostics). An NP may elect is negotiating to pay for several educational
to take a lower salary in exchange for a block of benefits, places a high premium on release
administrative time. Sometimes a negotiable time for training, and allows substantial time
point can be just a regular afternoon off! for documentation and billing and/or QA,
Because clinical acumen is critical to professional then an NP may be willing to accept a
success and reduced liability, continuing edu- lower salary. The NP may conclude that it
cation offers a wide range of possibilities in is most likely a supportive environment.
negotiating benefits. The following are points As with all contract negotiations, there will
for consideration as possible terms in a contract. be trade-offs. For example, an advanced
Any of these items could become potential practice registered nurse may decide to
contractual terms that would improve the NP’s accept a lower salary in exchange for assis-
employment contract. Therefore, the NP tance with educational benefits, including
should ask the following questions: both continuing educational costs as well as
 Who pays for work-related items, such as journal payment for college credits.
subscriptions, license fees, certification payments, NPs need to consider the value of this
association memberships, phone updates, computer benefit from the outset and advocate for
software (eg, up-to-date software and phone apps, personal professional development.
such as Epocrates), Drug Enforcement Adminis-  Is educational time off specified? The NP should
tration number, continuing education, CPR and separate educational time off from vacation
advanced cardiac life support training, etc.? Some time. In negotiating a contract, he/she will
practices sponsor subscriptions and want to ensure that mandatory certification

e48 The Journal for Nurse Practitioners - JNP Volume 12, Issue 2, February 2016
 required continuing education release time is 6. Malpractice insurance. Who will pay for the NP’s
not applied as vacation time. In general, most malpractice coverage? This is one of the most
NP contracts provide 40 hours of continuing important questions the NP will need to ask
education each year. Such education time and must not be overlooked. If provided by the
does not count as vacation time. employer, it is suggested that an individual
 Who will pay for liability coverage for volunteer- policy be considered as well. The reason for
ing? Generally, agency/employer-based lia- an NP to have an individual policy is if there
bility insurance will not cover volunteer is a conflict between the NP’s actions and the
activities, although the NP who carries in- employer’s actions, then the NP will have the
dividual malpractice may be covered for such right to their own attorney. The NP should
activities. It is important to review the review the agency’s or practice’s liability in-
malpractice that covers your current clinical surance to determine what type of insurance
practice periodically. coverage it carries.
State and federal laws ensure many pro- There are two types of coverage: occurrence-
tections as legally mandated guarantees that based and claims-made. Occurrence-based
do not need to be included in the written policies are effective if the coverage was in
contract. For example, protection against place when the act occurred. Claims-made
civil rights discrimination under Title VI, policies must be in effect at the time the act
Occupational Safety and Health Adminis- occurred and at the time the claim was made.
tration provisions, wage and hour require- Therefore, if the NP leaves the practice before
ments regarding compensation, protection a claim is made, he/she may need to purchase a
under the American with Disabilities Act, “tail.” A “tail” extends the insurance coverage
and freedom from age discrimination are through a specified time, typically the statute of
among these protections. limitations (the time allowed for a person to
5. Benefits. As an employee, the NP is entitled to bring a claim). Therefore, the NP may nego-
the same benefits that other employees in the tiate for liability insurance that covers him/her
organization receive. Benefits are tax deduct- for the entire time practiced with the
ible to the employer, so the more benefits employer, so, upon separation, the coverage
available, the better. If the NP provides his/her remains in effect for patients seen while the NP
own benefits, they are deductible to the NP, was employed.
but only if they are in excess of 2% of adjusted The NP should understand her/his own
gross income. malpractice insurance whether it is agency
Tax deductions can be tricky. For instance, coverage and/or sponsored or an individual
based on income, some benefits, such as health policy, and whether he/she will continue with
insurance, disability insurance, malpractice personal, individual professional coverage.
insurance, etc., may be deductible. However, Often NPs decide to carry their own policy
there are federal and state alternative minimum in addition to whatever is provided. When a
taxes that effect whether these will sufficiently patient is harmed, emotions run high, and
offset income and result in a lower tax burden. sometimes professionals become adversarial—
Consequently, a prudent NP will consult with sometimes the agency will attempt to scape-
a tax accountant or consultant to determine goat, or the doctor may not “remember”
what is in the NP’s best interest regarding telling the NP to do something or giving the
whether to ask the employer to pay for these advice that was relied upon and is now being
benefits. All of these are pertinent questions questioned in a bad outcome. The NP may be
that should be addressed in the employment alone to face the claim. Note that if there is
contract. If it is not in the employment con- an alternative dispute clause (also known as
tract, it will not happen.2 an arbitration clause) in the contract, any

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 disagreement will be settled outside of court. CONCLUSION
This is basically a promise not to sue in court, This article has presented many types of provisions
but rather to file any claim(s), including con- that may be written in a contract. Sadly, if an NP
tract disputes, through mediation/arbitration does not understand and still signs the contract, it
divisions of the alternative dispute section. may stand legally. Before finalizing, the terms of a
7. Term and termination. Most contracts are for a contract are negotiable. If the employer is unwilling
term of, for example, 1 year. But there is to negotiate conditions, the NP may consider
generally a paragraph included indicating that whether they are really interested in working for
the position can be terminated with a 30-day the employer. It is vital for the NP to understand
notice. The present authors, both nurses and everything in the contract before finalizing (“signing
attorneys, submit that this actually means that on the dotted line”). Although entering the work-
the NP has a job for only 30 days. Therefore, force is exciting, due diligence has requirements,
the NP accepting a contract with this termi- including hiring an attorney to assist with the nego-
nology has no security. Accordingly, prudent tiation process, but compliance is worth the effort. In
legal advice would suggest that the NP nego- most cases, legal consultation offers the best oppor-
tiate that he/she can only be terminated for a tunity for achieving the position and the employment
cause and the cause would be based on specific terms that the NP envisioned. Unfortunately, poorly
actions listed in the contract. If the NP does not negotiated or improperly performed contracts may
like the position and wishes to be released from result in breach. Therefore, it is important to find an
the contract, then one may include a provision attorney experienced with negotiating employment
stating that the contract can be terminated for contracts for NPs. One place to look for counsel
cause or by mutual agreement (ie, if they do not is The American Association of Nurse Attorneys
want you to stay there, then you probably do (www.taana.org/).
not want to be there, and if you do not want to As exciting as a new position is, the best advice is to
be there, they probably do not want to keep not rush in. The wise NP will take the time to be
you). Thus, the mutual termination clause certain that their contract is the one that will have the
works well. If either party is dissatisfied, then best chance of facilitating success for all parties. Just
the contract can be terminated, hopefully like patient documentation, if it is not documented,
without hard feelings. When the term is ending, then it was not done. In an NP employment contract,
immediately before automatic renewal, is a if it is not in the contract, it is not going to happen!
perfect time to renegotiate a contract. Disclaimer: This article was submitted on behalf
8. Noncompete and nonsolicitation. Surprisingly, of The American Association of Nurse Attorneys.
employers may attempt to legally prevent a It is for educational purposes only and should not
former NP employee from working near “the be construed as individual legal advice. It does not
former practice” for a certain period of time if constitute an attorney-client relationship. Readers
the NP separates or is terminated. For example, should seek personal legal counsel for specific
the employer, by contractual terminology, may legal issues.
attempt to restrict the NP from becoming
engaged in a “new practice” within a 30-mile References

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or industry that would pose a conflict of interest. This article is
submitted on behalf of The American Association of Nurse
Lorie A. Brown, RN, MN, JD, is a private practice attorney at Attorneys (TAANA).
the Brown Law Office P.C. Carolyn Dolan, RN, JD, MSN,
FNP-BC, is a professor at the University of South Alabama, 1555-4155/15/$ see front matter
© 2016 Elsevier, Inc. All rights reserved.
Baldwin Campus, in Fairhope, AL. She can be reached at http://dx.doi.org/10.1016/j.nurpra.2015.11.026

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