You've just received an offer letter from that job you interviewed for. Sometimes you want to let the employer know right away how interested you are. The verbiage says the letter isn't "binding." So you eagerly sign on the dotted line. Everything looks great…until it isn't.
Attorney Ericka Adler, JD, LLM, a partner at Roetzel & Andress, a Chicago-based law firm that represents physicians and healthcare professionals nationwide, described her client who was in this predicament. The physician, a dermatologist, left a practice where she had been employed because she had received an "amazing" offer letter that included promises about her new work location, staffing, equipment, and hours. She signed and immediately gave notice to her previous employer.
"When she received the actual employment contract, none of those details from the offer letter — which is also called a letter of intent [LOI] — were included," Adler told Medscape. The physician wanted to have the details from the LOI formally spelled out in the contract, but the employer refused.
"Basically, they said, 'This is our standard contract and you'll just have to trust us that we'll keep our word. We meant what we said in the LOI, but we cannot include those details in the actual agreement because everyone has the same form of agreement.' " The physician decided to sign the contract and accept the position.
She contacted Adler after she had been at her new position for a month. "She had received none of the things they had promised her in the LOI," Adler reported. "She lacked the NP and PA support, she lacked the equipment, she didn't have enough exam rooms. As soon as she started, someone with whom she was sharing call coverage left, and she was expected to take over. The LOI had a cap on the amount of call she would be required to take, but that verbiage didn't make it into the contract."
Adler tried to address this issue with the employer. "We couldn't say they had literally breached the agreement, but we did list the things that were mentioned in the LOI but on which they hadn't delivered. We asked them to fix the issue within 10 days."
The employer argued "that they didn't have to fulfill anything that wasn't spelled out in the contract, even if it was in the LOI. In fact, the contract specified clearly that the signed employment agreement was the only agreement and replaced any previous written or oral agreements between the parties."
The dermatologist ultimately left the new position. "She might have been able to have a legal claim against the employer for breach or perhaps 'detrimental reliance' — meaning, she might have argued that she had been financially harmed due to the false promises made to her. But it would have been difficult and expensive for her to litigate the issue," said Adler.
"It also didn't seem like the physician could remain in the job and develop a positive work relationship with the employer, given that she felt betrayed and misled, and didn't like the terms of employment, which didn't match her needs or expectations," said Adler.
Adler added that "most employers are not as unscrupulous and dishonest as this one was. But some employers do play on the fact that younger doctors — especially residents and fellows — tend to be trusting or feel they don't have negotiation power. They're often excited to get an offer and sign it without a second thought."
That's why she advises physicians to "review the terms of the LOI carefully and make sure you're comfortable with them before signing it; but know that the real contract to negotiate will be the actual Employment Agreement."
She also advises physicians not to give notice at their current place of employment until they've signed the final contract with the new employer.
On the Same Page?
Anu Murthy, Esq., an attorney and associate contract review specialist at Contract Diagnostics, explains that the LOI is a document that the candidate receives after an interview but before a full contract. Sometimes, the LOI is preceded by a verbal or e-mailed offer, which is less formal.
"An LOI is sometimes called a 'Term Sheet' or 'Memorandum of Understanding,' " Murthy told Medscape. "Typically, it lays out key provisions, such as compensation, initial term of the contract, location, and recruitment incentives." Sometimes it also includes mention of staffing, call schedule, malpractice, noncompete covenants, and other components of the position.
Justin Nabity, founder and CEO of Physicians Thrive, a physician financial advisory group, explains that LOIs are "a way for employers to gauge a prospective employee's level of interest."
The employer "doesn't want to send a contract with a lot of details before determining whether the candidate is really serious about the position, so the offer letter doesn't show the whole picture," Nabity told Medscape.
Dennis Hursh, managing partner of Physician Agreements Health Law, a Pennsylvania-based law firm that represents physicians, agreed.
"Another way of putting it is that the employer wants to see whether the prospective employee is on the same page. The LOI will typically include some key components that will later appear in a more complete and formal contract, together with other topics and details. Agreeing to those key components signals that indeed you and the employer are in accord," said Hursh.
But are you really on the same page with your prospective employer? And if you seem to be on the same page, and you sign the LOI, is that a guarantee that the employer will honor its terms?
Not necessarily, according to the experts. In fact, many LOIs contain some verbiage stating that the letter isn't binding, which can be confusing. Others suggest that it is binding, but the candidate doesn't realize that the letter isn't a formal contract and that the contract may contain details not included in the LOI or may omit details mentioned in the LOI, as happened to Adler's unfortunate client.
"One of the pitfalls I see is that doctors sign the LOI without recognizing whether it's binding or nonbinding," Murthy said. "If it's binding, it creates a legal obligation on your part and could preclude you from further negotiation once you see the contract and feel you'd like to negotiate some of its terms."
Binding letters are typically offered to candidates after some back-and-forth between the parties, and important terms have been agreed to, which can happen either verbally or via e-mail. Once these agreements have been reached, they're summarized in a "binding" letter before being extended into a full contract.
"But even if you've agreed on the terms verbally, it's still important to have someone more experienced review the offer letter before signing it," Murthy said. "It's important to understand the 'legalese' and what your rights and obligations are before agreeing to anything."
And certainly, if you receive a binding LOI, you shouldn't sign anything until you're sure you're comfortable with its contents and have more details.
Are "Nonbinding" LOIs Really Not Binding?
Even if the LOI is nonbinding, that doesn't necessarily mean you can sign it and expect to negotiate later. "I see people tripped up when they sign the LOI, thinking they'll negotiate later," said Hursh. "They may not like the terms — for example, they think the compensation is too low — and they figure they'll work it out at the contract stage, because the LOI is 'not legally binding.' "
But because the candidate signed the LOI, "the employer is under the impression that the compensation was acceptable, so now you've tied your hands — and the hands of any attorney you may consult down the road — to negotiate those terms."
Hursh says he is often consulted by physicians who signed the contract "to get the ball rolling," thinking that the LOI was "just a meaningless bureaucratic paper." They need to understand "that the employer wants to make sure they're in agreement on the basic points before getting into the details," he said. "Large hospitals with in-house counsel may not want to use their legal department's valuable time in redrafting terms they thought were acceptable to the candidate, and most practices don't want to pay a lawyer to draft an LOI and then come back and say, 'Actually, the physician wants more compensation.' "
Nabity summarized: "The LOI is essentially a negotiation tactic to take some of the cards out of the hands of the doctor and commit him or her to something they're not ready to commit to." Employers may be playing on the sense of pressure and candidate's fear that the job will slip through their fingers before if they wait too long to sign. "But it's better to wait longer at this stage before signing even a nonbinding LOI," he said.
What To Do Before Signing
So how should physicians relate to the LOI? Nabity advises "working through the details of the offer letter first, going through it carefully and identifying areas of concern, bearing in mind that employers never begin with their best offer."
He pointed out that physicians "rarely know their value and usually don't know how to work through the dynamics of compensation, call schedules, additional incentives, bonuses, and productivity," so they need to be informed about these areas before signing anything.
Murthy recommended "going back and saying [to the prospective employer], 'Thank you, but I need time to consider and evaluate this offer.' Then, do some due diligence."
At that point, you can hire an attorney to go over the offer, educate yourself about compensation benchmarks and what your worth actually is, or consult another trained professional or more experienced individual who can review the LOI before you sign it.
That's what Dominique Cleveland, MD, a Texas-based ob/gyn, did when she received an LOI 5 years ago.
"The offer letter from the group practice contained a statement that the group wanted me to come on board, what the salary would be, and the time frame that would be covered in the contract," she told Medscape. "It mentioned benefits and incentives and relocation, but it was only a short document — maybe one or two pages long."
At the time that she received her LOI, Cleveland was completing her residency. She consulted experienced faculty members from her institution to find out whether the terms laid out in the LOI "were the norm and were reasonable." She was "fairly certain" that the salary was low and this was confirmed by the faculty members she talked to. "So I felt comfortable asking for more [compensation]," she said.
The employer was receptive to her proposed changes, which were included in the more detailed contract that followed. "I can't say there were any surprises per se in the contract because I had negotiated my salary after receiving the offer letter," she said. She accepted the position and has been working there ever since.
Cleveland advises physicians "not to make a decision without speaking to someone who's experienced and can help you compare what's out there."
She also encourages physicians to ask for what they want, whether it's compensation or something else like call schedule or vacation time, without being afraid. "I'm a firm believer that you won't know what you can get if you don't ask for it," she said.
Nabity recommended not agreeing to any terms until you are ready to enter into negotiation, recognizing that negotiation is an "art" that requires skill and training. "Either get trained in negotiation, perhaps taking courses to advocate for yourself — which is rare, and most doctors aren't likely to do this — or go to a trained advocate, such as a lawyer, who can do so on your behalf."
You might share your concerns with the person who interviewed you, with the person whose name is on the LOI, or with the recruiter who can advocate on your behalf, Murthy said. "You can reach out to the recruiter and say, 'I really appreciate the opportunity, but there are some things in the offer letter I'd like to continue discussing.' "
When you're ready to negotiate, be sure to assemble all of your "asks" in a single document rather than going back to the prospective employer with "multiple individual questions multiple times," Murthy advised. It's more efficient and the employer or recruiter will appreciate that.
She also advised couching your request in language that expresses your appreciation for the offer and stating that you would like the agreement to serve the best interests of both parties. "Use open-ended language like that, and ask if it's all right for you to send back some questions, ask for clarification, or share concerns."
Most employers "will be fine with that," Murthy said. "Most won't say, 'This is it, take it or leave it.' If they do, that's a red flag for you to reconsider whether you really want to work for this particular employer."
Hursh suggested that if you choose to sign the LOI immediately, so as to rapidly let the prospective employer know of your interest, "you should add some type of qualification such as, 'I'm signing this to express my interest, but accepting the position will be dependent upon a more thorough review of compensation benchmarks,' for example."
Nabity agreed: "You can add a handwritten note to the signed LOI expressing that you're eager to move forward and proceed with the position, but it shouldn't be construed as accepting the terms of the LOI until you've seen the full contract."
"Remember, healthcare can't exist without doctors," Nabity said. "Doctors are the star players and should go into the negotiation process recognizing their true worth."
Batya Swift Yasgur, MA, LSW is a freelance writer with a counseling practice in Teaneck, NJ. She is a regular contributor to numerous medical publications, including Medscape and WebMD, and is the author of several consumer-oriented health books as well as Behind the Burqa: Our Lives in Afghanistan and How We Escaped to Freedom (the memoir of two brave Afghan sisters who told her their story).
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Cite this: Before Signing an Offer Letter: Read This - Medscape - Nov 17, 2023.