Clearing Smoke: What Employers Need to Know About Alabama’s Medical Marijuana Law

By Michael L. Jackson

Many employers in Alabama have experience with testing for employee use of marijuana. Yet there is now a new wrinkle to address: What about medical marijuana? 

Fortunately for employers, Alabama’s new medical marijuana law is accommodating to employers and leaves employers with mostly the same discretion as to their treatment of marijuana use—including medical use—as they had before the law.

Alabama Governor Kay Ivey signed the Darren Wesley “Ato” Hall Compassion Act into law on May 17, 2021. This Act creates a narrowly tailored system allowing for and regulating the use of cannabis to treat specified medical conditions. Although it became effective immediately when signed, medical cannabis may not become available for patients in Alabama until September 1, 2022, which is the deadline for the newly created Alabama Medical Cannabis Commission to create a system that allows people to apply for licenses to produce, transport and sell cannabis for medical use. 

This delay gives employers ample opportunity to understand the Act and revise their employment policies as needed.   

What specifically does the Compassion Act do?

The Compassion Act legalizes medical cannabis in limited forms such as tablets, oils, or lozenges to treat a long but closed list of medical conditions (there is no catch-all here). These conditions include: 

  • Cancer pain and related nausea
  • Crohn’s disease
  • Depression
  • Parkinson’s disease
  • Post-traumatic stress disorder
  • Chronic pain which has not responded to traditional treatment

For a patient to be authorized for cannabis use, the patient must have a “physician certification” from a medical doctor who is a “registered certifying physician” authorized by the Alabama State Board of Medical Examiners to certify patients for use of medical cannabis. The Board of Medical Examiners will be issuing rules soon for the issuance of certifications to patients. The patient must then be listed in the state’s controlled-substance database.  

The physician certification (which “does not constitute a prescription for medical cannabis,” though it seems to function like a prescription) may be valid for up to 12 months. The patient may possess no more than 70 doses at a time. If a person is found in possession of too many doses, or any cannabis without a prescription, he or she could be charged with a Class B felony. The Act prohibits recreational marijuana use and prohibits smoking or vaping marijuana.

What does this new legal framework and its regulations this mean for employers?

The Compassion Act is favorable to employers. 

  • An employer may continue to have the same drug policies it had before the law with no consequences.  
  • Employers are not required to accommodate the use of medical cannabis or to modify the job requirements of any employee who uses medical cannabis.  
  • Employers are not prohibited from refusing to hire, discipline, or terminate any employee as a result of that employee’s use of medical cannabis. 
  • Employers are allowed to establish and enforce a drug-testing policy that prohibits the use of marijuana or cannabis, including medical cannabis.  
  • An employer may adopt a policy requiring an employee to notify it if the employee possesses a medical cannabis card.

How does the law address employee relations?

The Compassion Act does not interfere with any federal restrictions on employment. It also does not grant an employee the right to pursue legal action against an employer for an adverse action related to the use of medical cannabis. Additionally, employers do not have to provide health insurance to reimburse an individual for costs associated with the use of medical cannabis.

As for workers’ compensation, the Compassion Act will not influence the discount available to employers who have a certified drug-free workplace policy. The Act will also not affect an employer’s ability to assert the statutory conclusive presumption of impairment in a denial of workers’ compensation benefits to an employee who tested positive for marijuana or refused to take a drug test after an on-the-job accident. 

If an employee is discharged from employment for a positive drug test from the use of medical cannabis and the employer had a policy warning the employee that a positive drug test could result in a dismissal, the employee will be considered to have been discharged for misconduct and ineligible for unemployment benefits.

All told, the new law makes it clear that it is up to the employer, and not the state, to determine whether and how it will monitor, allow, or punish the use of medical cannabis by its workers. An employer may keep the same policies it currently has about marijuana use and apply it to medical marijuana. 

An employer also may exempt medical marijuana from its drug policy unless it is subject to federal requirements, such as with truck drivers, enforced by the Department of Transportation. 

What does my business need to do to prepare?

While these provisions of the Compassion Act may, on the surface, suggest that little change is necessary in policies and procedures, in a tight labor market, it may be beneficial to employers to accommodate employees who may benefit from the use of medical cannabis. Even if an employer intends to prohibit all marijuana use, including medical marijuana, it would be best to make that clear in the employer’s policies and communicate it to employees. Otherwise, a good employee may erroneously assume that medical cannabis is exempt from the employer’s prohibition of marijuana use. That employee can then make an informed decision about whether to choose using medical cannabis for treatment or risk losing his or her employment.    

And though the authorized use of medical cannabis in Alabama is months off, before use begins, employers should also: 

  • Make an informed decision about how they want to address use of medical cannabis by their employees
  • Analyze how comfortable they are accommodating employees who could legally use the drug
  • Make appropriate changes to their handbooks or drug policies
  • Effectively communicate to employees how medical cannabis will be treated under the employer’s policies. 

Some employers may need to consider separate policies for safety-sensitive employees (like heavy equipment operators) and non-safety-sensitive employees (like office workers). 

One final note: Despite its name, Alabama’s Compassion Act does not require an employer to be compassionate and accommodate an employee with a disability whose doctor recommends use of medical cannabis. Also be mindful that federal law also does not currently require an employer to accommodate use of the drug because it is still illegal under federal law. But with many states now permitting medical use of marijuana and some states even permitting recreational use, some are questioning the reasoning for the existing federal prohibition (including U.S. Supreme Court Justice Clarence Thomas), and there are efforts in Congress and the courts to remove the federal prohibition. 

Given the trend toward more permissiveness for marijuana use, it would not be surprising for there to soon be a requirement under federal law to accommodate use of medical cannabis. For now, if you like your zero-tolerance policy, then you can keep your zero-tolerance policy.


Alabama Rules of Professional Conduct require that the following language accompany any communication concerning a lawyer’s services: “No representation is made that the quality of the legal services to be performed is greater than the quality of legal services to be performed by other lawyers.”  


Need advice on employment law? Contact Wallace Jordan today. 

Selling a Family-Owned or Other Closely Held Business: A Buyer’s Market at the Crossroads

By Michael J. Brandt and Matthew S. Hale


In January 2020, the first COVID-19 case was confirmed in the United States, changing the direction of the U.S. economy and bringing many businesses to, or even past, their breaking point.


According to Fortune Magazine, as of September 28, 2020, almost 100,000 small businesses in the United States had closed permanently after closing temporarily in April. This number will surely continue to grow, and will do so for the foreseeable future.


Small businesses, including family-owned businesses, which have survived until now, may be at a difficult crossroads.


Should they:

  • Try to survive?
  • Declare bankruptcy?
  • Dissolve and liquidate?
  • Sell the business to a new owner?


The struggle for these businesses coincides with one of the hottest buyers’ markets in recent memory. Strategic acquisitions (buy rather than build) are in vogue, and there is a significant amount of private-equity cash in the coffers, partly as a result of governmental pandemic assistance and low interest rates but also due to the increased  desire for private investment. These trends are expected to continue through the rest of 2021.


Based on the current market, this is an ideal time for small business owners to consider an exit strategy rather than a distressed sale. Business owners who decide to pursue a sale should keep in mind all of the following due diligence considerations when structuring their transactions.


  1. Consider the obligations owed to other owners before moving forward


Many companies’ internal organizational documents, such as an agreement among shareholders or members, will contain provisions restricting or otherwise affecting the ability to sell an owner’s interest. In the event a majority owner wishes to sell such owner’s interest, these restrictive agreements need to be considered.


Even if there is no agreement containing so-called “tag-along” rights (which permit minority owners to participate) or “drag-along” rights (which permit the majority to require the minority owners to participate), it may be beneficial to consult with other owners and negotiate with the proposed purchaser to see if a transaction can be accomplished that would be beneficial to everyone. Additionally, regardless of legal and contractual requirements affecting owner’s rights, the more input received, and the more discussions had, the better the outcome may be for all involved. This will make the final process significantly less challenging in the long run.


  1. Focus on stock rather than assets


Sellers of businesses are frequently better off focusing on stock during a sale. Historical performance and the one-time position of strength help support a better valuation. Liability transfers with the stock from the seller to the buyer (absent an agreement otherwise), leaving the seller to walk away with less liability than an asset sale. Conversely, buyers typically prefer an asset sale because they can pick and choose the assets and liabilities that they take on.


  1. Be sure to value your assets and assess tax issues appropriately


It is helpful for any business considering selling to get an appraisal of all assets, including facilities, equipment, and intangible property such as patents, trademarks, copyrights, and trade secrets. Not only does this help the seller in obtaining the best price for the business, but it also provides necessary inputs when considering tax implications of the sale.


The intangible property is especially crucial in calculating the value of the business, as it is the hardest to assess but potentially the most lucrative aspect of the business. Additionally, the seller needs to be aware of the tax implications of the sale while negotiating asset value. It is possible that the highest-valued offer may in fact not be the most profitable for the seller due to tax considerations.


  1. Prepare for non-competes and ongoing post-sale transition


A non-compete clause from key members of the seller has been a common request from buyers, even pre-Covid. In Alabama, these clauses are considered reasonable with a limit of one or two years depending on the type of sale. However, frequently the buyer is willing to keep the selling owner on staff to aid in the transition after the sale is complete. The selling owner has much more institutional knowledge, better client relationships, and familiarity with brand positioning than the new owner.


It may be in everyone’s best interest for the transition period after the sale to include both the buyer and the seller in an effort to keep the business running smoothly.


  1. Anticipate potential post-Covid contractual provisions


In today’s fading Covid world, there are additional factors to take into consideration during the sale of a business. The buyer may require a “material adverse effect” clause as a kind of insurance if the business is unable to recover from Covid-fueled economic crises. This will allow the seller to cancel the sale if it is determined that the business’s value has change significantly and to the buyer’s detriment during the pendency of the sale transaction.


Material adverse effect clauses can become even more significant when they are paired with a longer-than-normal due diligence process. The due diligence period will include examination of health and retirement benefits, the financials of the company, and analysis of important contractual relationships. The buyer likely will request a covenant that the seller continue to “operate in the ordinary course of business” during the due diligence period and closing process.


Buyers in this Covid-defined world also tend to request more warranties, as well as having extended closing deadlines due to business disruption and remote negotiations, all of which put a higher risk on the seller.


Lastly, if the seller or buyer took out a PPP loan, an analysis of the effect on the company’s income and expenses should be undertaken, and the SBA must be notified of the sale. Sellers should expect buyers to want to exclude the PPP funds from calculations that affect the purchase price.


Letting go of a family-owned business is never easy, even in the best of times. The present market provides an opportunity to sellers to recover the value (or even more) of the work put into building and operating the family business.


Buyers are looking, and are ready and able, to purchase businesses. If your business is in a difficult financial position, selling may be your best option.  Begin assembling your team of accountants, attorneys, and other professionals today to guide you through the process.


Alabama Rules of Professional Conduct require that the following language accompany any communication concerning a lawyer’s services: “No representation is made that the quality of the legal services to be performed is greater than the quality of legal services to be performed by other lawyers.” 


Deciding whether to sell your business? Wallace Jordan can help. Contact us today.

Understanding the Law of Construction Licensure in Alabama

By Larry S. Logsdon and Ben Robinson

An important and common issue for the construction clients our firm represents is the law of proper licensure for contractors and subcontractors. While all states have licensing requirements, Alabama’s are arguably among the nation’s strictest.

The state has very specific laws governing the licensure of general contractors and subcontractors. Anyone working on a construction project over a specific amount must be licensed. Otherwise, there can be virtually no collection on a mechanic’s lien or a civil judgment if the contracting client does not pay for services rendered.

What is a “contractor” in Alabama?

As an overview, “construction” is defined broadly in Alabama. To that end, per the licensing statute,  anyone working on a construction project under a contract with costs exceeding $50,000 (or $5,000 for a swimming pool project) needs to be licensed with the state’s Licensing Board for General Contractors. Not having a license while working on a successfully bid project is a complete defense to any claim to collect amounts owed for work completed.

Sometimes, this is not as straightforward as it seems. For instance, many subcontractors are not aware that if they use another company, including a labor broker, for a portion of their work, that company must also have a general contractor’s license. If not, then the portion claimed to be owed for that work does not have to be paid. For anyone conceiving strategies to get around the licensing statutes through license-sharing or other loopholes, cases in Alabama impose a catchall roadblock, disallowing “creative schemes designed to circumvent its requirements.”

 What are the basic requirements for licensure?

 Licensure requirements are covered by Alabama Code § 34-8-2 and additional rules created by the Licensing Board for General Contractors. To briefly summarize, a general contractor must apply to the licensure board by completing the required forms and paying an application fee of $300 or a renewal fee of $200. Renewals are required annually. The forms must be accompanied by proof of liability insurance. General contractors are classified into categories based upon the most recent financial statement prepared by a certified public accountant, as well as previous experience and equipment. Contractors may not bid on a type of work not included in their request for a license. As part of the initial application process, an examination may be required by the licensure board to determine the contractor’s qualifications.

Once all of the requirements have been met, the board issues a certificate to engage in general contracting. The certificate stipulates the type or types of work the contractor is allowed to bid upon or perform and sets maximum bid limits for a single contract, which are set by the lesser of no more than ten times the net worth or ten times the working capital shown in the contractor’s latest financial statement. These types are defined this way:

 is not to exceed $100,000

B is not to exceed $250,000

C is not to exceed $500,000

D is not to exceed $1 million

E is not to exceed $3,000,000

U is for unlimited bids

Subcontractor licensure requirements also include an annual application with a $150 fee and a renewal fee of $100. However, instead of the other required documents, subcontractors are required to provide three references, which could come from general contractors, architects, or engineers.

 What are some of the possible fines, punishments and repercussions for non-compliance?

Anyone found to be engaging in contractor work without the proper license or who is using an expired or revoked license, is subject to criminal penalties in the form of a Class A misdemeanor, which can carry up to a year in prison and a fine up to $6,000. Anyone found to neglect to provide a licensure number to an awarding authority can be charged with and convicted of a Class B misdemeanor. There is also potential misdemeanor liability for an awarding authority who considers and accepts a bid from an unlicensed contractor.

Anyone found to be engaging in contractor work without the proper license or who is using an expired or revoked license may be found guilty of a Class A misdemeanor, which can carry up to a year in prison and a fine up to $6,000.00. It is a Class B misdemeanor to neglect to provide the licensure number to an awarding authority. There is likewise potential misdemeanor liability for an awarding authority who considers and accepts a bid from an unlicensed contractor.

Further, a subcontractor cannot recover any amounts if it was not properly licensed. Claims relying on work from an unlicensed sub-subcontractor, including labor brokers, are not collectable even if the work has been performed. Because of this, it is important to check whether any such company providing subcontractor work or labor has a proper State of Alabama general contractor’s license. In our collective experience, most labor brokers do not.

What do the courts say? What are some potential complications and caveats under the law?

 Alabama courts have routinely held that general contractors must have their license in place before bidding on a job. However, subcontractors may bid without a license if their license is current before their work on the project begins. Remember, a contractor or subcontractor’s failure to obtain proper licensing is a complete defense that ultimately leave you unpaid.

As mentioned earlier, a contractor or subcontractor’s failure to obtain proper licensing is a complete defense to any attempt he or she may make to collect a judgment or enforce a lien in a civil lawsuit for non-payment. With limited exception, it is a defense that is most often successful if raised.

Complicating matters are the rules that flow from the statute. These include Regulation 230-X-1-.26, commonly known as the “51% Rule”. The rule allows a general contractor to take a job as long as 51 percent or more of the work is in a classification in which the contractor is licensed. If no part of the work makes up 51 percent of the project, the contractor must be licensed in the type of work that comprises the largest percentage. The types of “Major Classifications” listed in Regulation 230-X-1-.27 include:

·       Building Construction

·       Building Construction under 4 stories

·       Highways and Streets

·       Municipal Utility

·       Heavy/Railroad

·       Specialty Construction

The Licensing Board advises that if an applicant is not qualified for a Major Classification, it should request to be classified under one of several Subclassifications or Specialty Classifications. It is important to note that a contractor can be licensed in one specialty and still be in violation of the licensure rules if that subcontractor additionally performs work for which it is not licensed. For example, a contractor licensed in the major classification of Building Construction with a specialty in sitework may not be able to also pour concrete foundations.

There are no court rulings at this time regarding general contractors who are licensed within a Major Classification but who start a project in a specialty under that classification for which they do not have the proper license. Unless the Rules are revised and clarified, the question could be eventually decided by the Alabama Supreme Court in a way that surprises general contractors who believed they were complying with the law.

Thus, the best practice is to ensure that the contractor is licensed for any specialties that may be included in its work.


 Alabama contractor licensure law can be a bit brutal, but it is generally fair and predictable. Knowledge of the legal requirements and preparation are key.

While compliance with Alabama’s laws requires an initial investment of money, time, and mental effort, proper licensure avoids far more expensive conflicts that could arise later, including a loss of remedies for breach of contract or specific performance. That is why regular, direct communication by contractors and subcontractors with the Licensing Board for General Contractors—and with seasoned construction attorneys—is strongly recommended.

For more construction law information, please visit:


U.S. News and World Report recently named Wallace Jordan’s construction law and construction practice to its list of Tier 1 firms in its region. Discover more about the firm’s consistent, excellent construction attorneys here.

No representation is made that the quality of the legal services to be performed is greater than the quality of legal services to be performed by other lawyers.

Subchapter V: How This New Bankruptcy Option Protects Small Businesses

By Clark R. Hammond and Gary Lee

For some struggling small businesses, a new bankruptcy option offers a cheaper, easier and less cumbersome path to restoring financial health than a traditional reorganization plan under Chapter 11 of the U.S. Bankruptcy Code.

The timing is fortuitous. As an economy battered by the COVID-19 pandemic sputters its way further into 2021, facing business bankruptcy may increasingly be a necessary reality. This would be uncomfortable in normal times but seems outright brutal now.

Bankruptcy is often an arduous, contentious process that can take years and years to complete. Further, the complexities, and potentially explosive costs, of business reorganization plans governed by Chapter 11 threaten to squash a smaller debtor company out of existence rather than lead it back into daylight.

The difficulties of debtor life under Chapter 11 were on the minds of U.S. lawmakers before the pandemic took hold. The Small Business Reorganization Act of 2019 (SBRA) was signed into law in August 2019.

It took effect on February 19, 2020, just weeks before the World Health Organization declared the pandemic.

The law amended Chapter 11 to include a new Subchapter V, which governs a distinct bankruptcy framework for qualifying a “small business debtor.”

Which businesses qualify as a “small business debtor” eligible to choose this bankruptcy route under Subchapter V?  

“Debtor” under Subchapter V is defined specifically as a “small business debtor.” Well, then what does that mean?

The SBRA amended the existing definition of “small business debtor” in section 11 USC 101(51D)(A) to expand the debt threshold for eligibility. Now, that ceiling for eligibility, which includes both secured and unsecured debt, rests temporarily at $7.5 million. If and when COVID-19-related economic relief lapses, though, that maximum will reset to $2.725 million as set by the SBRA. That’s still up from the original $2 million prior to enactment.

The updated definition of “small business debtor” does exclude owners of “single-asset real estate,” making these property owners ineligible for Subchapter V. Section 101(51D)(B) also excludes “a group of affiliate debtors” with aggregate debt greater than the $2.725 million maximum.

What advantages does a Subchapter V bankruptcy proceeding provide vs. regular Chapter 11? 

Subchapter V is an option for these small business debtors, not a mandate. Yet the benefits are appealing enough that if your business find itself in the situation, choosing Subchapter V just makes infinite sense.

  1.  Only debtors can file a Subchapter V reorganization plan. A common fear that a barely-breathing small business might possess is that one of its creditors will beat it to federal bankruptcy court and file an “involuntary” Chapter 11 petition. Under Subchapter V, only the debtor can initiate the petition, giving it a dose of additional control under pressure. The debtor then has 90 days to file its reorganization plan to the court.
  2. Subchapter V debtors do not need to submit a full financial disclosure statement. One of the most grueling, intensive and expensive parts of a Chapter 11 reorganization is requirement of a disclosure statement that lays all of its financial wounds bare in painstaking detail. In contrast, Subchapter V dictates that only a “plan” that includes a “brief history” of business operations, a “liquidation analysis” and projections as to payment terms and amounts under the plan. The plan also needs to submit control of future earnings and income to the bankruptcy trustee. Here, the debtor saves time, money and stress.
  3. Subchapter V debtors do not need to pay quarterly fees to the U.S. Trustee’s office. Under most bankruptcies, The U.S. Trustee’s appointee is entitled to a quarterly fee for their work in advising the debtor and overseeing the reorganization plan. As a handbook published by the U.S. Department of Justice released soon after the passage of the SBRA makes clear, that is not the case under a Subchapter V proceeding. This is another expense the small business debtor avoids under the plan. Unlike a traditional Chapter 11, however, the Court will appoint a Subchapter V Bankruptcy Trustee, who will be entitled to a fee.
  4. Subchapter V promotes an accelerated timeframe for confirming and completing a reorganization plan. The new subsection requires the bankruptcy court to hold a status conference within 60 days after the petition is filed by the small business debtor and an order for relief is granted (See 11 USC 1188). The policy consideration is not ambiguous, as this statute tacks on the language, … “to further the expeditious and economical resolution of a case under this subchapter.” The confirmation of the Subchapter V also does not require the affirmative vote of any creditors, removing another Chapter 11 obstacle. Additionally, the subsection dictates that the reorganization plan be scheduled over a span of three years or, if that proves too ambitious, across five years.
  5. There is no requirement to form a creditors’ committee for oversight of unsecured debt. When we said a Chapter 11 saga can be arduous, we meant it. That process is subject to the mandatory consideration or use of a committee of the debtor’s unsecured creditors, which can weigh down the efficiency with which the debtor winds through and satisfy the details of the confirmed plan. Subchapter 5 does away with this mandate, through the appointed trustee retains the right to file a motion to form a committee if deemed necessary.
  6. Only the small business debtor can request a modification of the reorganization plan. This change affords extra protection to the debtor by putting the power to modify any plan that has been confirmed but has not yet been consummated solely in its hands. Unlike under Chapter 11, a trustee can not apply for modification. That matters because the debtor no longer has to worry about facing larger regular payments as their business conditions improve.
  7. Subchapter V debtors are not subject to the “absolute priority” rule and can retain equity in their companies. This may prove to be the greatest benefit the SBRA offers. Under Chapter 11, a debtor’s senior creditors are said to have “absolute priority” in recovering debts. They get the first dive in the pool, so to speak. As a result, debtors often find that that this burden is so great that they cannot maintain control of the company and have to cede their equity. Not so under Subchapter V. The new law explicitly disclaims the rule so long as the court finds that the plan is “fair and equitable” and doesn’t unfairly discriminate against any of the creditors. This provision clears the way for another, which requires that the debtor must pay amounts equal to its “disposable income” in a given time period. These two adjustments help prevent a loss of control or a total collapse.

The COVID-19 debt ceiling of $7.5 million has been extended through March 27 2022, and will sunset back to the specified $2.725 million absent an extension. Even so, Subchapter V looks to have lasting impact in any case. It is an avenue to endure business hardship with greater success.

No representation is made that the quality of the legal services to be performed is greater than the quality of legal services to be performed by other lawyers.

Need an attorney to help you best plan a bankruptcy? Contact Wallace Jordan today.

Joining a Medical Practice: 8 Factors to Guide Your Decision

By William B. Stewart

As a doctor, your choice of where to practice and who to affiliate with can be career-defining. Before you have completed your residency or fellowship, you will need to be deliberate and thoughtful in selecting a practice group to associate yourself with.

In weighing your options for this next stage of your medical career, there are key points to keep in mind.

1. Start with how well you expect to fit in with your peers and partners in the group. 

How compatible are you, both professionally and personally? Consider your own professional goals. Do they align with the goals of the practice?

What about practice styles, schools of thought, training or competency issues – might the differences frustrate you professionally?

You also want to ensure that there is a current need for your services within the group. Referrals will be your lifeblood as you begin your practice; if you are filling a void, it may be more likely that the referrals will come your way rather than going to a veteran member of the practice. If you are to be the first member of a group to offer your specialty services, you must ascertain whether sufficient patient volume exists to support a practice.

Importantly, ask yourself: Can you trust the other physicians and support staff who you have met? Trust is central to a happy and successful partnership.

2. Factor in where you will live. 

Remember that your choice of medical practice will affect your family (if you have one). Can you see yourself and your family thriving as part of this community?

Take a close look at the schools, churches, and social groups you might join. What kinds of activities are available in the area? Do you enjoy hiking and skiing, or are you a philharmonic aficionado? Will this location support your interests?

Consider housing: types, location, and prices. Would you prefer to live close to where you work, or are you okay with a commute? Do you want a single-family home, or would you prefer an apartment or condominium with fewer upkeep requirements?

Don’t let an unusually high salary fool you into moving to a community that will not support your lifestyle and your happiness.

3. Evaluate the environment and culture of the affiliated hospital.

Is there a need for your specialty or subspecialty? Much like a driven professional athlete, you want to come in as a first-string player rather than filling a spot on the bench.

Once you determine that there is, indeed, a need for your services, consider whether the infrastructure is there at the hospital to support your practice. Will your practice be adequately promoted? Have the leaders made a commitment to acquiring needed equipment, technology and other resources? Will you have resources to stay abreast of technological needs as treatment options expand? And, with lifestyle again in mind, ask about ER on-call and other coverage requirements of the hospital. Will they fit into your day-to-day life? Also, ask whether you could maintain that on-call coverage if you switch to another practice group in your region in the future.

4. Gauge the outlook for your professional growth and market-value based on historical precedent.

Assuming you are joining an established practice, consider how the group has fared over time. Just as an unusually high salary might suggest that the group has had difficulty finding and retaining physicians and staff, the turnover rate is an even more indicative metric.

Ask questions in the community. What is the group’s standing in the local hospitals and its reputation in the broader community?

Ask questions in-house. Have there been any splits or disagreements in the group? What were the circumstances that contributed to other physicians leaving the group?

Look at the legal history. Have there been lawsuits or disputes that affected the group? If you can, get a feel for the level of communication between doctors and staff. A positive, healthy working environment requires esprit de corp within the group.

5. Conduct extensive research on the group’s history and reputation.

When you join a medical practice, the reputations of the individual members of the group will affect how patients, hospital colleagues, and the community at large perceive you. Do some digging. Find any skeletons.

Have any members of the group been suspended from medical practice, had hospital privileges limited, or been sued for malpractice? Are any of them “rated” by the insurance carrier? If so, what is the history of malpractice claims, judgments, and settlements?

Have these actions affected the insurability of the group? Has the group changed carriers: why and when? Is their malpractice coverage with a mainstream carrier, or have they had to look further afield to “high risk” carriers for coverage?

You might consider having an attorney review the group’s insurance policy to ensure that you will be sufficiently covered if you ever need it.

6. Examine the financial health of the group, and probe compensation structure.

Arrange to speak with the group’s office manager and/or accountant and ask lots of questions.

How much practice debt exists and who is responsible for guarantying this? Are there tax liens? As with a marriage, you don’t want to be surprised that you are acquiring large debt responsibilities.

Ensure that bills are paid promptly and that staff members are adequately rewarded. Remember that support staff can make or break your experience and your practice.

Ask about the solvency of the group members, realizing that the group’s accountant might not have the answer to this inquiry. Turn to your own expert, too, to verify what you are told. Your accountant should review the group’s balance sheets and year-to-date income statements.

Also, ask the office manager or accountant about the group’s compensation schema. How is compensation determined for you and the other physicians in the group? Find out which parts of your generated income will go into the pool and which you will be able to keep.

More crucial compensation questions to ask: Must your “moonlighting” earnings be given to the group? What about drug studies and honoraria? Does the group pay productivity bonuses; if so, how are they determined? If you affiliate with a hospital are there economic opportunities available, such as the ability to secure a separate contract to be a medical director of a unit or oversee a clinical area?

From the group’s pooled funds, how are the revenues of “designated health services” and “ancillary services” divided or credited to the physicians? How is overhead allocated in determining compensation?

Look at the current range of compensation of physicians within the group to try to estimate your income potential in the future. Will that compensation be sustainable for you and your family? Just as you want your accountant to review the books before your join the group, get assurances that your financial professional will be able to verify compensation due by accessing the books and records on an ongoing basis.

Then comes the fun part: What are the fringe benefits? Financial compensation should be augmented with perks that improve your life and long-term security. You want to look at current benefits: automobile allowance, club dues, society dues and memberships, books and subscription reimbursements, CME allowance, even a cafeteria plan.

You’ll also need to review benefits that will support your lifestyle long-term: Is there a tax-qualified pension or retirement plan? What about deferred compensation plans? Will the group supply life, health, and disability coverage? Your largest financial burden to date is likely your student loans. Is there a provision for repayment or your student loans? Ask about the tax ramification of these benefits as well.

 7. Beyond compensation and fringe benefits, review other key terms in the employment contract.

Understand the buy-in provisions for “partnership” and when this is typically offered. Do you feel comfortable with the duration of the agreement and the cancellation terms?

Is there adequate time off? Does the contract lay out pro-rata call and clinic coverage obligations? Do these assignments and the time-off fit into your vision of your professional and personal life? Consider the assignment of new patients to practitioners. Will you have a fair chance to see patients with the pathology matching your training and interests? Are patients assigned to physicians based on their insurance or pay classification? Does the scheme seem equitable?

Assuming that you are likely to make a change in the future, be sure you understand your rights if you leave the group. Become familiar with the financial arrangements in case of separation. Who pays the malpractice insurance tail premium? Is any compensation or interest in accounts receivable “earned” under a production formula payable after termination?

If you stay in the geographic area, some patients might choose to follow you. Will you have access to them and their medical records?

A non-competition agreement might be in play; understand it before you sign on the dotted line. You never want to entertain the possibility of a dispute, but you do need to be prepared. Alternative dispute resolution will likely control these talks.

 8. Before making a final decision, turn to the people in your life who you trust. 

What do your spouse, friends, colleagues, advisors and/or mentors think about the opportunity? What did your accountant report? Have you consulted an attorney? The contract is likely long and cumbersome. An attorney familiar with medical group contracts can provide assurance that you aren’t missing anything.

Ultimately, this decision is one of the most impactful choices of your life. Don’t make it alone.

Proposed CTA: Need More Expert Guidance? Let’s Start Advising You Today.

Business Interruption Insurance Claims due to Covid-19

Overview of State and Local Government Powers During the Covid-19 Pandemic

Phillip Corley, April Danielson, and Gabe Tucker authored this article that appeared in The Alabama Lawyer regarding the complicated issues surrounding orders and restrictions from local Alabama municipalities and the State of Alabama during the COVID-19 pandemic.
July 2020 Overview of State and Local Gov’t during Pandemic

Probate Through Intestacy: How it Works and Why You Should Avoid It

By Robert L. Loftin

What happens if someone dies without a will? It is a scenario that many families face, but one governed specifically by Alabama law.

With no guidancefrom the deceased person on how they would want their assets distributed, family members are hamstrung by Alabama law. This is called “intestacy,” and this is how the law seeks distribute assets “fairly.” The policy goal of the intestacy process is to move the transfer of property to heirs with the least amount of bias.

This “will for all the people,” however, can lead to thorny legal issues, hurt feelings and long-lasting family feuds.

Understanding Alabama’s Intestacy Schema

In Alabama, the probate court has jurisdiction over all estates, whether they are created under a will, or whether there is no will. In the case of the intestate estate, the court appoints an administrator. This can be a family member (surviving spouse, for example), or in some cases, the court appoints a county administrator – this is a lawyer who administers estates for those dying without a will.

After the administrator is appointed, and all debts, taxes, asset liquidation costs and other related expenses are accounted for, the remainder of the estate is distributed under a statutory framework, which was passed by the state legislature.

The Surviving Spouse’ Share of the Estate

  • If neither of the decedent’s parents are alive, and there are no children, grandchildren or other lineal descendants, then the surviving spouse receives the entire estate.
  • If one or both parents are living and there are no children/other lineal descendants, then the surviving spouse receives the first $100,000 and half of the remainder.
  • If there are surviving children and both the decedent and the surviving spouse are the parents, the surviving spouse receives the first $50,000 and then half of the remainder.
  • If there are surviving children but one or more of them is not the child of the surviving spouse, then the spouse gets an even half of the estate.

The Surviving Children’s Share of the Estate

  • If all the decedent’s children are alive, then portion of the estate which left after the surviving spouse receives their share is distributed among them in equal shares.
  • If one or more children dies before the decedent, and that child had children, then their children (the decedent’s grandchildren) inherit their deceased parent’s share, and it is divided among those grandchildren equally.
  • Children of the half-blood are treated the same as children of the whole blood, as long as their natural parent was the decedent.

The Rest of the Family

  • If all the decedent’s children are alive, then portion of the estate which is left after the surviving spouse receives their share is distributed among them in equal shares.
  • If the decedent has no surviving spouse and no surviving children/lineal descendants, then their surviving parents receive the entire estate.
  • If there is no surviving spouse, no surviving children/lineal descendants or surviving parents, then the estate goes “laterally” – to the decedent’s brothers and sisters and then nieces and nephews.Even surviving grandparents are potentially eligible for intestate distributions.

Here is an example of intestacy in action: Let’s assume that Wanda dies without a will but with $1 million in assets. She is survived by her father Fred, her husband Harry (second marriage), two children by her first marriage (Arthur and Brutus) and a child (David) by her marriage to Harry. Wanda also had a child – Charles – by her first marriage, who predeceased, her. Charles had two children… After paying funeral costs, paying debts and expenses, there is $840,000 remaining in the estate.

Under intestacy, Harry will receive one-half of the estate, or $420,000. The balance of the estate will be divided into four equal shares of $105,000. Arthur, Brutus and David will each receive $105,000, and Charles’ two children will split his share equally ($52,500 each). Wanda’s father will not receive a share.

Addressing the challenges of intestacy.

While Alabama’s distribution scheme may seem simple, confusion prevails when there are children from multiple partners. Things can, and often do, get ugly. Consider:

  • In counties that do not use a county administrator, the court typically appoints the surviving spouse to serve as administrator of the intestate estate. If there is no surviving spouse, then any “next of kin” entitled to a share of the estate can be appointed. In this case, which heir does the court select? The appointment process is now open to disputes and the resulting bitterness lurking over the process.
  • Protecting the interests of a minor childrenbecome complicated when there is no will in place to provide what will happen until the child reaches majority age, which is 19 in Alabama. The court must appoint a guardian and conservator to represent the child. That person is chargedwith exploring the options available to best manage the inherited share and to ensure meddling family members manipulatedecisions counter to the child’s best interests. Whowill serve as guardian? A family member? An attorney? This is a critical ruling.
  • Intestacy can also ignite family resentments. Wait, he did nothing for her, and she gets the same amount I do? The conflict can rise to the level of litigation, which sometimes grows nasty and lingers for years.
  • What if a child of the decedent has been financially helped more than the other children? Maybe the deceased parent gave a child $20,000 to put toward down payment on a house purchase. Does that mean the court should consider this as an advancement of that child’s share and shave $20,000 from that child’s share? Family disputes over advancements are so common that Alabama devotes almost a third of its law on intestacy to this.

The moral hereis that if intestacy can be avoided, it should. Plan your estate now. Take an inventory of your assets, spell out your wishes and contingencies, and leave as little of your estate exposed to intestacyas possible.This will help eliminate confusion and uncertainty—and unnecessary potential family disagreements.

Need an attorney to help you plan your estate? Contact Wallace Jordan today.

Overview of Drainage Law in Alabama and How the Law Impacts Municipalities

Wallace Jordan attorneys, Phillip Corley and April Danielson, authored a recent article entitled “Overview of Drainage Law in Alabama and How the Law Impacts Municipalities” published in the Fall 2020 edition of The Alabama Municipal Journal, which provides information to Alabama municipalities related to drainage issues on private property. To read the full article, please click here.

Employment Law Update Regarding Supreme Court Title VII Ruling

Click here for an update on a Supreme Court ruling regarding discrimination on the basis of sexual orientation.