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What If Your Employer Doesn’t Pay You?

April 3, 2011

Suppose that you work for a contract management group and the group loses its contract with the hospital. Now suppose that the group decides not to pay its physicians for the work that the physicians have performed at the hospital. What recourse do the physicians have?

Difficult situation.

First of all, the physicians will need to look at their contract.  What does the contract say about payments to the physicians? Most contracts will have some language promising the physicians either a salary (usually in academic institutions), an hourly wage, RVU-based income, or a combination of these. If you’ve worked the hours or you have generated the RVUs, then the group owes you the money.

The first thing the doctors should do is protect their interests. If the group isn’t paying its physicians, chances are likely that the group isn’t paying its malpractice insurance, either. Contact the malpractice insurer immediately regarding tail insurance. Often, insurance policies have only a 30 day window between the time a policy is canceled and the time that tail insurance must be paid. Wait too long and you won’t be able to purchase tail insurance. Even a $100,000/$300,000 tail policy that pays for defense costs (probably costing $3000-$5000) is better than no tail insurance at all. All emergency medicine contracts should have a provision where the hiring entity agrees to pay for tail insurance, so if your former group doesn’t pay for your tail insurance, then the money you are forced to pay amount to damages for breach of contract.

While a breach of contract action is a consideration under these circumstances, often breach of contract suits are costly and time-consuming. If a small group failed to pay its debts, by the time the issues are resolved, the group would probably be no money left for a judgment, anyway. If the group owes you less than $10,000 (in Illinois), a small-claims action would be an easier and quicker way to perhaps get at least some of your money. While the up side to a breach of contract suit in small-claims court is that it can be filed and resolved quickly, the down side to a small-claims case is that you can only get damages up to the “small claims” maximum. If you have damages of $20,000, you either have to file a case in another division of court.

What else can you do to put pressure on a group to pay you the money that it owes you?

Some additional legal maneuvers you could try include the following:

Go to the insurance companies and Medicare/Medicaid and demand payment for the services that you provided to their insureds. You may even considering trying to file a physician’s lien on insurance payments. Keep in mind that most physician contracts contain a power of attorney that allows groups to bill for physicians’ services and to retain the money. You may need to try to obtain a court order allowing you to collect for the services you performed before you can try to collect the outstanding payments.

If the arrangement between the physician and the group/hospital was an employer/employee as opposed to an independent contractor relationship, then contact the US Department of Labor and applicable state employment agencies and file complaints for unpaid wages. Employees are also entitled to file claims for unemployment  compensation. If there is an employment relationship and the group or the officers are not paying unemployment insurance, state and federal agencies will start breathing down their necks.

If it appears that the group or hospital knew about the termination and planned on not paying you for the work that you performed, then consider filing criminal charges against the group and/or the officers in the group and/or the hospital for theft of services.

Consider attempting to get a temporary restraining order or an emergency injunction preventing the group  from disbursing any money until the doctors and the malpractice insurance premiums are paid. Technically TROs and injunctions are equitable remedies where a claimant has to show that monetary damages alone are insufficient as compensation, but it would be fairly easy for a physician to show how goodwill, hospital privileges, future malpractice insurance, and even future licensing would be affected by an inability to defend oneself from a malpractice suit. In fact, professional licenses are generally considered property rights which lawyers can use to bring Constitutional Due Process issues into the argument to make it more compelling.

If the group is a corporation, the officers of the group have to act like a corporation. If the officers weren’t going through the proper formalities and documentation to operate as corporation, debtors may be able to “pierce the corporate veil” and hold the officers personally liable for the corporation’s debts. Check to see if the group made all its filings with the state and request corporate meetings/minutes, etc.

One of the other things that may help you get your money is publicity. If the group has more than one contract, bring the issue to light with the administrators at the hospitals where the group has contracts and with the other physicians who work for the group.

A call to the media letting investigative reporters know that the group at a local hospital is being investigated by the government for failure to pay wages and is being investigated for theft of services would likely put added pressure on the group to pay its debts.

One other way that you may be able to help prevent such problems is to take a proactive approach in your contract negotiations. In contracts that I review, I often request that the groups insert language to the effect that certain provisions will not be valid unless the group provides the physician with “prompt notice of any occurrences reasonably likely to result in the termination of the contract between the group and the hospital or of any financial difficulties experienced by the group.”

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