The Number One Threat Faced by Physicians (and It’s Not Malpractice)

The current legal landscape faced by doctors and practice managers requires more careful attention than ever before. Increased compensation and compliance issues, HIPPA regulation, and greater DEA prescription scrutiny are just some of the issues on the minds of top practitioners. Surprisingly to many, the most common threat they face is closer than most realize: the internal danger of employee lawsuit risks.

What most of these claims have in common, regardless of merit, is that the practice lacked proactive defensive planning in the form of employment agreements and handbooks that use existing law to protect the rights of both parties. This creates a process for dispute resolution that helps avoid such issues and discourage frivolous suits in the first place.

The average small business in the U.S. is five times more likely to be sued over an employment issue than any other reason and employees are suing more often, winning more often and winning proportionately larger and larger judgments. There are a number of factors contributing to this issue, not the least of which are current economic conditions that make losing a job a bigger crisis for your employees than ever before.

Smart employment attorneys in a tough job market realize that employees are more willing and likely to make claims against employers with or without cause and these types of claims are increasingly marketed to employees like personal injury lawsuits. Attorneys advertising “no risk or cost” lawsuits understand that promises of awards totaling several times the average employees annual compensation are powerful motivators. These attorneys also understand that the risk of litigation costs, stress, distraction, and reputational damage are powerful tools and most often lead to quick, low cost settlements in the employees’ favor, even when the employer is guilty of no wrongdoing.

Here’s how the racket often works: First, employees who have either been terminated for cause, downsized due to the economy or who know they are facing adverse action because of their performance finally respond to one of the aforementioned attorney marketing campaigns. Second, the employee is promised a large settlement at no personal cost or risk, often several times their annual compensation. (As just one example, the current average national sexual harassment verdict is $530,000). Under the third phase of this well-organized process, the employee’s attorney forwards a demand letter to the employer or former employer threatening both EEOC action and a civil lawsuit that will claim several hundred thousand dollars in damages. Finally, that same demand letter offers an attracting alternative; an immediate settlement typically in the range of $20,000 to $30,000 if the employer will pay immediately.

We find that many physician employers, even when adamant about their lack of any wrongdoing, often feel forced into these settlements. They choose to limit their stress and financial exposure, often at the advice of their own defense counsel that understands the financial risks the employer faces on both a potential adverse award as well as the costs of the legal defense itself, which can quickly run into six figures.

Practices at all levels of sophistication routinely discover only in a crisis that the employment agreements that should be in place were either very generic and deficient examples obtained through an employee benefits company or by the practice owner themselves, often through a friend who copied their practice’s own outdated generic manual or from an unknown source on the Internet. Employment laws change rapidly and having an updated employment manual and alternative dispute resolution agreement is the first and most crucial line of defense against this routine and unavoidable exposure.

Manuals can be obtained from a variety of resources but getting the input of an employment law specialist is always a crucial part of the process. Most employment law attorneys have reasonably priced packages that include a variety of manuals, policies and forms. Other national organizations practice exclusively in this area provide low cost reviews and customized handbooks that address your state’s specific laws, As one example the Center for Employment Dispute Resolution (CEDRSOLUTIONS.COM) performs a 40-point check-up on existing employment manuals less than the average cost of a single hour consult with an employment law attorney at a time of crisis.