Introduction to the Employment Contract
The goal of an appropriately drafted employment contract is to establish an understanding between parties. It should include the reasons that the parties are entering the contract, the rights and obligations of each party, the policies that govern the agreement between the parties, means by which the agreement may come to an end, and more.1 The contents of the contract typically take place through negotiations outside the four corners of the document. That understanding is then memorialized in the document. In fact, most employment contracts contain clauses that render discussions not memorialized in the contract as non-enforceable. These discussions include oral negotiations and written offer letters—both of which, although non-binding, may still have great importance to the contract process.
Negotiations that take place between an employer and employee who will work side-by-side should ideally occur using a relationship-based negotiation style.2 This is important to create a positive working relationship before employment begins. Briefly, a relationship-based style focuses on the commonalities between the two parties and how they can achieve a contract that benefits both parties. This can be contrasted with a transactional negotiation style that is typically employed when the agreement marks the end of the relationship such as purchasing a car or a house.2 The intricacies of negotiations are beyond the scope of this paper, but it is important to acknowledge that negotiations should only be the beginning of a healthy employment relationship.
Written offer letters are non-binding on the final contract but may be psychologically binding on the employee.3 An employee who signs the offer letter prior to engaging in negotiations lowers their negotiating leverage.4 Once the offer letter has been signed, it becomes more difficult for the employee to effect change. After all, why should the employer negotiate terms with which the employee was previously content? Employees are typically advised not to sign offer letters and to negotiate based on the terms provided in the contract directly.
One final note before exploring the contract more thoroughly: an employee should consider whether the employment agreement is even necessary. As of this writing, the veterinary job market is very strong, and securing full-time employment should not be difficult for most veterinarians. An arrangement that does not have a written employment agreement would naturally be at-will (meaning both parties may terminate the arrangement at any time) and would not contain restrictive covenants such as non-competition clauses. This could be advantageous for employees in many circumstances. Except for rare exceptions, written employment agreements are not required to create a valid employment arrangement. They are, however, commonly utilized among veterinarians.
This paper will now turn its attention to common traps and pitfalls of which a veterinarian should be aware before signing an employment agreement. It will be broken down into the major categories of compensation, employment agreement benefits and perks, and restrictive covenants.
Compensation
Compensation for veterinarians is typically paid with one of three methods: salary, base or production (commonly called “prosal”), or production.5,6 There are ample resources available for veterinarians to learn about these payment methods, and this paper will not delve into those. It will, however, discuss two major concerns related to compensation: adjustments and negative accrual.
Compensation: Adjustments
Veterinarians should pay specific attention to their contract if it contains language that allows an employer to make an adjustment to salary at their sole discretion. This language might include a phrase like:
“Any future adjustments to the Base Salary will be made at Employer’s sole discretion according to the policies and procedures of Employer and without requiring written modification of this Agreement.”
This example allows the employer to change the employee’s salary at any time and to any amount at their discretion. This may occur prior to the end of the employment agreement and without the need for additional negotiations. Although one might think that an employer would not exercise this provision, the careless veterinarian could be caught in a trap if the contract has stringent restrictive covenants and non-disparagement clauses. This veterinarian could be trapped in a job where their pay could be altered, they are unable to work at another job nearby, and they cannot speak out against the employer who placed them in the situation.
Veterinarians may encounter similar issues if they are paid under a draw method of production. A draw functions as an advance on the veterinarian’s production, and an employer may reserve the right during the term of the agreement to adjust the draw based on the veterinarian’s production. Relevant language may be:
“If the amount of your Draw exceeds the amount of your Production-based compensation for a given period, Practice may reduce the amount of your Draw based on your actual Production.”
Compensation: Negative Accrual
Negative accrual is a term used to describe when a veterinarian does not produce enough revenue to pay their base salary over a period of time, and the employer therefore holds them responsible for making up the deficit over the next period.7 Many employees are now aware of negative accrual and have been educated that it is not in their best interests. However, some employers have found creative ways to include negative accrual without raising employee suspicion.
Employers may hide negative accrual in accessory documents that are referenced by the contract and are legally binding. These documents may be labeled names such as Exhibit A, Payment Schedule, or Production FAQs. An unwary veterinarian might not pay attention to supporting documents and will not realize their agreement contains negative accrual until their second or third pay period.
A recent trend in production-based pay has been a shift from monthly production bonuses to quarterly production bonuses. Admittedly, many employers may prefer this payment method to save time and effort by calculating production four times a year rather than twelve. However, this seemingly innocuous method also works to the detriment of employees by functioning as a hidden form of negative accrual. By spreading out the employee’s production calculation, this method essentially creates negative accrual within each quarter. An example calculation is provided below. Assume in this example that the veterinarian earns a base salary of $120,000 ($10,000 monthly) and 20% production on gross revenue. Their production threshold, therefore, is $50,000 monthly.
| January | February | March | Total | |
| Gross Revenue | 60,000 | 20,000 | 70,000 | 150,000 |
| Production Bonus (if Monthly) | 2,000 | 0 | 4,000 | 6,000 |
| Production Bonus (if Quarterly) | N/A | N/A | 0 | 0 |
In this example, a veterinarian whose production is calculated monthly would earn $6,000 in production bonuses over the three-month period. The same veterinarian whose production is calculated quarterly would not earn any production bonus. Under the quarterly production method, the February deficit is essentially absorbed by the surplus generated in January and March.
It is important for a veterinarian to understand how they will receive compensation so they can ensure that their expected pay is correct throughout the term of the agreement. So, before signing, they should consult with legal counsel to ensure that the terms of the agreement correctly reflect their understanding.
Employment Agreement Benefits and Perks
This paper will next turn to traps and pitfalls related to various perks, bonuses, and other benefits often offered by an employer. It will specifically examine bonuses, equity, and student loans.
Benefits and Perks: Bonuses
Signing and retention bonuses have become more common for veterinarians. According to the American Veterinary Medical Association’s 2025 Report on the State of the Economic Profession, over 16% of polled veterinarians received a signing bonus in their latest contract.5 A signing bonus, by definition, is a payment made upon acceptance of the job offer. Although commonly referred to as signing bonuses, veterinary employment contracts more commonly provide retention bonuses to be paid after a certain period of time. Example language includes:
During the first payroll cycle, which occurs immediately after ninety (90) days from the Start Date, Employer will pay or cause to be paid to Veterinarian a one-time signing bonus of $15,000.00.
The first installment of ten thousand dollars ($10,000) will be paid at the 90-day anniversary of the Effective Date of this Agreement, and the second installment of ten thousand dollars ($10,000) will be paid at the 6-month anniversary of the Effective Date of this Agreement.
It is important that employees first understand when a bonus payment is to be made and to consult their tax advisor as to what effects this bonus will have on their annual tax filings. It is also vital that employees are aware of the repayment provisions of bonuses in the event of termination of the employment agreement. The unsuspecting veterinarian could be caught off guard by a provision that requires them to repay a bonus in full such as:
At any time either party terminates the contract for any reason, the Doctor is liable for refunding the employer for any bonus . . . paid by the employer.
In this example, the veterinarian would be responsible for the full repayment of the bonus received during employment no matter who terminates the contract, why they terminate the contract, or when the contract is terminated during its term. This single sentence could cost a veterinarian thousands of dollars in unanticipated expenses even if the employer decides to terminate the agreement without cause.
Benefits and Perks: Equity
Broadly speaking, equity is a form of ownership in the employer’s business.8 It is an investment in the business that can be provided as a benefit in an employment agreement. However, ownership in the business (no matter how large or small) may come with strings attached, and a veterinarian must be mindful of these strings before entering into the employment agreement.
First, ownership in a business comes with its own form of non-compete agreements. Non-compete agreements are discussed more generally later in this paper, but many of the normal rules do not apply to equity. As a starting point, non-compete agreements related to equity should be assumed to be enforceable regardless of the jurisdiction and are often more restrictive than a typical non-compete agreement.9 A veterinarian who wants to leave the practice may find themselves in a situation where they cannot work in the same city and have little recourse.
Second, many equity arrangements provide that shares of ownership are not freely transferrable on the open market as might be the case with publicly traded stock. Instead, the only party to whom the veterinarian may be able to sell their ownership to is the business itself. Furthermore, the business may not be obligated to buy the ownership back.9 This leaves the veterinarian in a vulnerable position where they cannot sell their ownership and attempts to seek alternative employment could cause a breach of contract.
Benefits and Perks: Student Loans
Student loan repayment is a hot topic in veterinary medicine. It is not uncommon for some graduating veterinarians to have student debt that is over double their starting salary.10 The federal government passed the Coronavirus Aid Relief and Economic Security (CARES) Act in 2020, a portion of which allowed employers to provide up to $5,250 in tax-free student loan payments for employees.11 On the surface, this may seem like a fantastic benefit for employees. However, there are hidden issues of which veterinarians should be aware.
First, receiving a tax-free student loan payment may not be as financially beneficial as simply receiving taxable income. Many veterinarians are on income-based repayment plans that will result in student loan forgiveness after a lengthy period. Most of these individuals will never pay down their principal and will simply accrue interest over that time. Receiving additional taxable income that can be invested at the veterinarian’s discretion rather than tax-free student loan payments could be in the employee’s financial interest. Veterinarians are advised to consult with their tax advisors to determine what is best for their circumstances.
Second, veterinarians are advised to follow federal developments in case the law changes. As of the time of this writing, this benefit has been made permanent by the One Big Beautiful Bill.12 The laws regarding student loans are evolving, however, so veterinarians should keep abreast of the current rules to maximize their financial returns.
Restrictive Covenants
Finally, this paper will turn to common restrictive covenants that have the potential to trap veterinarians. It will specifically focus on two of the most important restrictive covenants: non-compete clauses and non-solicitation clauses.
Restrictive Covenants: Non-Compete Clauses
Broadly, non-compete clauses prohibit an employee from working for a competitive business for a certain time and in a certain area. The Federal Trade Commission (FTC) issued a rule creating a nationwide ban on them in May 2024, but a federal judge enjoined this rule mere months later.13 After a change in federal administration, the FTC vacated the rule and dropped its appeal in September 2025.14 As of the time of this writing, the enforceability of non-compete agreements varies by state with at least a handful of states outright banning their use.
The good news for veterinarians is that non-compete agreements, generally, are easier to understand than other provisions. They have three core elements that need to be evaluated: (1) time, (2) distance, and (3) scope. Veterinarians should be aware of how long the non-compete will be active after termination of their employment agreement and for what distance from their place of employment.15 The industry standard for distance is an air mile radius that covers approximately 90% of the clinic’s revenue. Finally, the veterinarian needs to be aware of the scope of the non-compete provision as this is the element that has the most potential to catch an employee unaware. The scope defines what type of work is not allowed such as general practice, urgent care, equine practice, and others. Employees need to ensure that this provision is not so broad as to exclude them from the entirety of veterinary medicine with language such as:
The Employee shall not . . . own, operate, manage, engage in, or participate in any manner in, or render services for, any venture or enterprise that directly or indirectly engages or proposes to engage in any business in competition with Company or its affiliates, including the provision of veterinary, boarding, or grooming services.
This provision could arguably prohibit the employee from engaging in any veterinary care during the restrictive period. At best, the veterinarian could hope to argue before a court that they wish to engage in activities that do not compete with the business (e.g., shelter medicine), but such a legal battle could take months, if not years, and cost thousands of dollars. As the saying goes, an ounce of prevention is worth a pound of cure. In other words, negotiating the terms of the agreement at the outset could save significant time and money later.
Restrictive Covenants: Non-Solicitation Clauses
As non-compete covenants lose favor among employees, many employers have turned to new ways to protect their businesses through restrictive covenants. A non-solicitation agreement, strictly defined, prohibits a former employee from poaching clients or employees from their former employer.16 When appropriately written, such an agreement is generally not offensive to an employee. The reasonable employee typically does not desire to “steal” the investment in time and money that the employer has put into building their business. However, creative lawyers may craft non-solicitation agreements that actually serve as non-service agreements such as the following:
The Employee shall not . . . directly or indirectly solicit or accept business from or otherwise divert from Employer any customers or prospective customers of Employer for products or services that are similar to or competitive with products or services offered or sold by Employer during Veterinarian’s employment.
Although this text does contain a non-solicitation agreement, it also effectively functions as a non-compete agreement. Under these terms, a veterinarian could breach their contract by treating a patient brought in by a former client without any attempted solicitation. This has the potential to cause an ethical dilemma for the veterinarian who could be faced with the choice of adhering to their contract and foregoing treatment of a patient or violating their contract to treat a patient. This dilemma would be particularly exacerbated in emergency situations.
Conclusion
The purpose of an appropriately structured employment contract is to memorialize the agreement between an employer and an employee. Oral negotiations and written offer letters, although not binding, play a role in the overall contract process. Veterinarians should be aware of common issues that arise in the context of employment agreements, including those that occur regarding compensation, employment agreement benefits and perks, and restrictive covenants. Any veterinarian seeking to enter into an employment agreement is well advised to seek legal advice to ensure they understand the provisions of their contract and to avoid costly mistakes before the contract is signed.
References
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4 Malhotra, D. (2014). 15 Rules for Negotiating a Job Offer. Harvard Business Review, 92(4), 117–120.
5 American Veterinary Medical Association. (2024). 2024 AVMA report on the economic state of the veterinary profession. AVMA.
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10 VIN Foundation. (Last visited 2025, December 9). Student Debt Center. https://vinfoundation.org/resources/student-debt-center/
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12 Barnes, J, Brecher, J, et al. (Last visited 2025, December 9). Federal OBBBA round-up: what employers need to know now. https://www.jacksonlewis.com/insights/federal-obbba-round-what-employers-need-know-now
13 Federal Trade Commission. (Last visited 2025, December 9). FTC announces rule banning noncompetes. https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes
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