Excerpted from The Biggest Legal Mistakes Physicians Make: And How to Avoid Them

Edited by Steven Babitsky, Esq. and James J. Mangraviti, Esq. (©2005 SEAK, Inc.)

Download Free 646 Page E-book: The Biggest Legal Mistakes Physicians Make and How to Avoid Them

Executive Summary

There are myriad state and federal employment laws that both employers and employees may encounter. Getting professional advice from an employment attorney and understanding which laws apply to a particular situation before action is taken can save thousands of dollars in future bills.

Mistake 1     Thinking Discrimination Laws Apply Only to Large Employers

Federal laws against discrimination due to race, sex, religion, color, national origin, and disability apply to employers that have 15 or more employees. The federal law against age discrimination applies to employers that have 20 or more employees. The Equal Pay Act, another federal statute, applies to almost all employers. All employees, including part-time and temporary workers, are counted in determining whether the employer is covered under the Equal Pay Act. If, during any calendar year, the requisite number of employees was working in any 20 weeks, whether or not the weeks were consecutive, the employer is covered under the act. Some states also have discrimination laws that may apply to employers that do have enough employees to make them subject to the federal statutes (see Mistake 9).

Action Step     Physicians should review the number of employees on their payroll. Even if the requisite threshold numbers aren’t met at the beginning of the year, they may be met toward the end of the year and subject the employer to the discrimination laws.

Mistake 2     Thinking Partners, Owners, or Other Employed Doctors Can’t Make Discrimination Claims

Most physicians practice within a corporation, limited liability partnership, or limited liability corporation. They are employees of the entity, and if they discriminate against other physicians, whether associates or owners who are also employees, they can be held liable. Whether or not a principal of a medical practice is considered an employee is a fact-specific issue. The factors to be considered include whether the organization can hire, fire, or set the rules and regulations of the individual’s work; to what extent the organization supervises the individual’s work; whether the individual reports to someone higher in the organization; and to what extent the individual is able to influence the organization. Also considered are whether the parties intended that the individual be an employee, as expressed in written agreements or contracts, and whether the individual shares in the profits, losses, and liabilities of the organization.

Action Step  Physicians should consult with employment counsel and consider these factors when deciding how the practice will be organized. Everyone, including the doctors, should be educated about discrimination and liability for discrimination.

Mistake 3     Thinking That Employee Leasing or Multiple Entities Will Avoid the Threshold Number of Employees

Under certain circumstances, more than one business can be aggregated to meet the minimum number of employees for coverage and liability purposes. This happens when there is an integrated enterprise. The factors involved are the degree of interrelation between the operations, the degree to which the entities share common management, centralized control of labor relations, and the degree of common ownership or financial control over the entities.

Action Step  Physicians should review how their practice is organized and who the owners are, especially the physicians who share facilities, labor relations, and common ownership with any other entity. Assume, for example, that a corporation owns the building in which the doctors practice and it is leased to the practice and to other practices in the building. The building corporation employs a building manager (who reports to the office manager), day and evening porters, and a building engineer. The doctors’ practice, which has 12 employees, shares benefits, accounting functions, payroll, and hiring with the building corporation. This organization would be considered an integrated enterprise.

Mistake 4Not Having a Written Discrimination Policy

Physicians’ offices should have a written antidiscrimination policy specifying that discrimination (which includes harassment) based on sex, race, color, religion, age, or handicapping condition is illegal and will not be tolerated. The policy should clearly set forth what to do if an employee believes that he or she is a victim of discrimination. The policy should have at least two alternatives for reporting discrimination, including one that bypasses the alleged discriminating official. It should also inform employees that they will not be retaliated against for making a complaint of discrimination. Some states have antidiscrimination laws that cover sexual orientation, and it may be a good idea to include sexual orientation in the policy, even if not required by state law.

Action Step  Physicians should print the antidiscrimination policy in the company’s employee handbook or as a separate document and disseminate it. They should review the policy with each employee and have each employee sign an acknowledgment that he or she has received, read, and understands it. In addition, the policy should be prominently posted in a break room or anyplace else where employees congregate. Display posters may be obtained for free from the Equal Employment Opportunity Commission.

Mistake 5     Not Understanding What Is Considered Sexual Harassment

The sexual harassment policy should define sexual harassment as any unwelcome sexual conduct, including sexual advances, requests for sexual favors, and other verbal or physical conduct that enters into employment decisions or creates an intimidating, hostile, or offensive working environment (i.e., one that unreasonably interferes with an individual’s work performance or other terms and conditions of employment). The offensive conduct may be heterosexual or homosexual. Any time an employee suffers a negative tangible employment action as a result of sexual harassment by a superior (e.g., a demotion or termination for refusing sexual advances), an employer will be held strictly liable for the consequences. In cases in which a supervisor creates a hostile work environment only (i.e., no tangible employment action against the victim), the employer will be held liable for the harassment if the victim follows whatever steps are in the policy but the employer fails to take measures to prevent and correct the situation. When an employee is subjected to a hostile work environment by a coworker, an employer will be held liable for the harassment if the employer knew or should have known about the harassment and failed to take immediate and appropriate responsive action. Liability for sexual harassment may also be found where there is a consensual relationship between employees that ends but where one party doesn’t want it to end or has bad feelings that cause him or her to behave in ways that negatively affect the workplace.

Action Step     At least once a year physicians should have a short presentation given for all employees concerning illegal discrimination and harassment, including a discussion of the company’s complaint procedures. Physicians should consider having an employment lawyer give the talk. In addition, interoffice dating should be prohibited.

Mistake 6     Ignoring Complaints of Discrimination

It isn’t enough simply to have a discrimination policy; employees have to know that the policy will be enforced and that all complaints will be thoroughly investigated and, if warranted, prompt remedial action will be taken. In addition, retaliation against employees who complain about discrimination is prohibited by law, and it is not unusual that a retaliation claim has more merit than the underlying discrimination case.

Action Step  Physicians should decide who will investigate each allegation (e.g., the office manager, the human resources department, outside counsel, or another service) and give them the authority to do a thorough investigation, which includes talking with the victim and the alleged perpetrator.

Mistake 7      Failing to Deal Appropriately with a Pregnant Employee

Having a pregnant employee in a small to medium-size office where there are 15 to 20 employees can put added stress and work on the other employees, both before and during the maternity leave. Nonetheless, pregnancy must be treated in the same manner as disabilities. If a male doctor is ordered to take three months off following a heart attack, then a pregnant woman must be allowed to take off the time her doctor orders as well. Similarly, one may not establish mandatory maternity leave that is not related to the employee’s ability to work. Even when the motive is to protect the unborn child, it is illegal to discharge the employee unless it is demonstrated that no less restrictive alternatives exist or that the employee would be exposed to unsafe levels of radiation or a similarly toxic environment and it is determined that only women would be affected by the hazard.

Action Step   Physicians should be consistent in the manner in which they treat temporarily disabled workers, including pregnant employees. In addition, physicians should not ask about a prospective worker’s intention to become pregnant.

Mistake 8  Not Realizing That FMLA Applies to Professional Practices

It is not unusual for practices, especially those in big cities, to have 50 or more employees, which would mean the Family Medical Leave Act applies. When the act applies, the employer must allow any employee, except a key employee, as many as 12 weeks of leave in any 12 consecutive months, starting with the first day of leave under the act if the employee or the employee’s spouse, parents, or children have a serious medical condition or for the birth or adoption of a child. The leave time may be taken consecutively or intermittently. At the employer’s discretion, FMLA leave may be with or without pay; however, employee benefits must be maintained during the period of leave. Upon return to work, the employee must be reinstated to the same or an equivalent position. A key employee is one who is salaried and eligible for FMLA leave but is within the top 10% of employees residing within 75 miles of the worksite.

Action Step            Physicians should require employees to bring proof of the need for FMLA leave. Pregnant employees may be required to use FMLA leave if employees with other temporary disabilities are required to use it as well.

Mistake 9Failing to Realize More Generous Employee-Oriented State Laws May Apply

States can and do have their own employment statutes, many of which are more generous than the federal laws and apply to any employer regardless of size. Some states have statutory or case-based actions for discrimination, wrongful termination, public policy exceptions to “employment at will,” negligent hiring and/or retention, promissory estoppel or negligent misrepresentation, intentional infliction of emotional distress, invasion of privacy,

defamation, assault and battery (usually raised along with a sex harassment allegation), and breach of contract.

Action Step   Physicians should check with an employment lawyer as soon as a discrimination issue arises, since state statutes have varying statutes of limitations, which can range from as little as 180 days to several years.

Mistake 10  Pressing Employees to Decide Immediately Whether to Waive Rights in Exchange for Severance Pay

While it may be tempting to give an employee severance pay (or receive severance pay) in exchange for a general release of all claims, including the Age Discrimination in Employment Act of 1967 (ADEA)claims, employees who are 40 years or older are covered by the Older Worker Benefit Protection Act. That means if the employer wants to preclude or settle a dispute without litigation, the employee must be given something of value over what any other employee would receive, 21 days to consider the offer (which must specifically refer to releasing ADEA rights or claims), and seven days to rescind the acceptance of an offer. They also must be advised that they can and should seek legal counsel. If the offer is part of an early retirement package, the employee must be given 45 days to consider it.

Action Step     Before terminating an employee and getting a release of claims arising out of the employment or before waiving any right, physicians should consult with an employment attorney. The attorney will evaluate the situation and advise the employee on the offer or on whether there are viable claims that could be asserted that are more valuable than the severance pay.


Physicians, whether employees or employers, have to be mindful of both state and federal discrimination laws that may affect their practices. By understanding what conduct is prohibited, physicians will be less likely to engage in inadvertent acts that can lead to liability for discrimination.

Additional Resources

  • J. Berniker, “Legal Implications of Discrimination in Medical Practice,”Journal of Law, Medicine & Ethics (Spring 2000)
  • A. Rehm, “The Americans With (or Without) Disabilities Act: Preemployment Medical Inquiries and the Nondisabled,”American Journal of Law & Medicine (Winter 2000)
  • U.S. Equal Employment Opportunity Commission, www.EEOC.gov

Written by:

Joyce F. Glucksman, Esq.

Peer reviewed by:

Julie M. Weiner, Esq.

Download Free 646 Page E-book: The Biggest Legal Mistakes Physicians Make and How to Avoid Them