■ Legal and regulatory proceedings:

Navigating legal or regulatory processes

The changing practice of medicine: Employment contracts and medical liability

7 minutes

Published: September 2012 /
Revised: February 2021

The information in this article was correct at the time of publishing

Physicians are increasingly practising medicine through contractual arrangements such as employment contracts or contracts for service. If the American experience is any indication, an increasing number of doctors are considering or trying different practice arrangements. The American Medical Association found that, in 2018, 34.7% of physicians worked either directly for a hospital under contract or as an employee, or in a practice at least partly owned by a hospital1.

Within Canada, the range of practice arrangements is quite broad. While contractual practice arrangements can benefit physicians in a number of ways, doctors need to be familiar with the medico-legal aspects of these arrangements. A sound understanding and careful consideration of the terms of the contract will help physicians make informed choices about the agreement in question, as well as medical liability protection.

Practice arrangements

Traditionally, when physicians delivered care in hospitals, they normally did so under a privileges-based model that granted them rights to perform specific acts and access to certain services and facilities. This model recognized the independent nature of the doctor.

Privileges-based models are governed by a framework set out in provincial or territorial legislation and regulations that requires specified procedures be adopted for renewing, restricting, and terminating privileges. These procedures are normally contained in regional health authority or hospital bylaws.

This model is also supported by case law that clarifies the processes that should be in place to protect a physician's rights when a hospital seeks to restrict, revoke, or not renew the physician's privileges. For example, all provinces and territories have statutory appeal processes for physicians who are denied or lose their privileges.

More recently, a staff appointment model has developed whereby physicians are appointed to the medical/practitioner staff at the health authority or hospital level. The appointment model includes many protections for physicians found within the privileges model.

While privileges and appointment models have been successful and continue to be used across Canada, many physicians and hospitals arrange for the delivery of medical services pursuant to contractual arrangements or a combination of models and payment structures. As such, many physicians practice under some form of contractual arrangement. There are a variety of such arrangements, including employment contracts (similar to those for other professional staff such as nurses) and service agreements (in which the doctor provides medical services as an independent contractor). It is important that physicians carefully assess the rights and obligations under such contracts before signing.

Considerations when signing a contract

The CMPA does not generally provide legal assistance to members who are reviewing or considering entering into a contract. However, members may wish to consult the CMPA document Medical-legal issues to consider with individual contracts when reviewing a contract with their personal or business lawyer. When appropriate, members may also wish to contact their local medical organization, association, or federation for assistance with the review of prospective contracts.

Contracts to provide medical services must be carefully reviewed to ensure the terms are balanced and fair. Physicians must be aware that the contract will define the terms of their employment or agreement with the hospital or health authority. The terms of the contract will likely be points for negotiation between the doctor and the healthcare organization, and physicians should not hesitate to raise any concerns or propose changes to the contract as part of the negotiation process. The physician’s legal counsel, or local medical association or federation, will be able to assist physicians with such negotiations.

It is important for physicians to be aware that the procedural safeguards associated with the privileges model, and the guarantees in hospital bylaws, do not necessarily extend to other arrangements such as employment contracts or independent contractor agreements. The CMPA generally advises physicians engaged as employees or under other contractual arrangements to ensure any proposed written agreement contains the same procedural protections that are guaranteed under the privileges model.

Contractual arrangements can pose additional medico-legal risks for doctors that should be considered before such arrangements are finalized. For example, physicians should generally avoid indemnification clauses in their contracts that could lead them to be held legally responsible for the actions of the other party in the contract.

Prior to entering into contracts, physicians should also ensure they clearly understand other specific elements of the contract, such as job description, call schedule, outside activities, and contract termination2. For example, the job description could outline specific types of care to be provided (e.g. internal medicine) and specific patient care hours. In terms of outside activities, specific conditions on items such as moonlighting, volunteer clinical work, or research may be included.

Physicians should also be attentive to what their rights will be when the contract ends or is renewed. For example, to what extent is the doctor involved in updates or renewals to the agreement? Under what circumstances can the physician end the contractual relationship? What are the consequences of terminating the contract? Can the physician access hospital records if they leave or are terminated? These are important questions with answers that may vary according to individual arrangements and can greatly impact a physician’s work life and medical practice3,4. Again, physicians should explore these issues in detail with their legal counsel, or their local medical association or federation.

Liability protection

An effective medical liability system is an important part of any quality healthcare system. It assures healthcare professionals (including physicians) and their patients that their interests and access to due process will be protected. Most Canadian physicians, including those delivering care in hospitals, obtain their liability protection from the CMPA. Hospitals and hospital employees are typically covered by the hospital's insurance arrangements.

As hospitals and physicians adopt employment and other contractual arrangements, there may be an interest in considering what is known as enterprise liability protection. This model involves the hospital, health authority, or other healthcare organization assuming responsibility for providing liability protection to all individuals (including physicians) delivering care within that organization — whether as employees, independent contractors, or through other arrangements. The CMPA does not support the enterprise liability model in Canada and members should carefully examine the implications associated with enterprise liability protection. There should be no assumption that the interests of the institution and the physician will necessarily align. In addition, enterprise liability protection is limited to legal actions against the healthcare professional. For CMPA members, protection and assistance extends to a range of medico-legal circumstances, including College and hospital complaints.

As the healthcare environment adapts to fiscal and human resource constraints, physicians may be asked to consider practice arrangements that differ from the traditional privilege-based model. The CMPA encourages members to carefully review these arrangements, to consult with personal legal counsel, and to explore all the dimensions and implications of such arrangements.


  1. Kane CK. Updated data on physician practice arrangements: For the first time, fewer physicians are owners than employees. American Medical Association [Internet] (2019). https://www.ama-assn.org/system/files/2019-07/prp-fewer-owners-benchmark-survey-2018.pdf
  2. Stagg Elliott V. Seven land mines of hospital employment contracts. American Medical News [Internet] (2011). https://amednews.com/article/20111219/business/312199963/4/
  3. Lorrel AL. Hospital employment pits work rules against physician rights. American Medical News [Internet] (2012).
  4. American College of Physicians. Physician Employment Contract Guide [Internet] (2017). https://www.acponline.org/system/files/documents/running_practice/practice_management/human_resources/employment_contracts.pdf

DISCLAIMER: The information contained in this learning material is for general educational purposes only and is not intended to provide specific professional medical or legal advice, nor to constitute a "standard of care" for Canadian healthcare professionals. The use of CMPA learning resources is subject to the foregoing as well as the CMPA's Terms of Use.