Physicians considering their first post-training employment agreement are often considering more than one opportunity. It’s common to sign a contract with one employer, only to receive a better offer shortly after. Many want to back out of the signed agreement and accept the new opportunity when this happens.
If this is you, what are your options? Is it “safe” to do this?
There are important legal questions to consider before you do this, and your first step is to get a lawyer. Period. Full stop. We will discuss some issues you might face in your contract, but every situation is different and this is not the time to DIY your termination!
Burning Bridges
First, let’s acknowledge that employers do not take kindly to this. At a bare minimum, you’ll likely burn a bridge, and you probably will not be able to seek employment with this employer in the future. Time heals some wounds eventually, but maybe not in this situation.
Contractual Penalties: What Does Your Contract Say?
Second, you need to know what your contract says about this before you proceed. Here are six issues you may need to consider in this situation, but there may be more depending on your unique situation.
1. The Contract Might Be Silent
Most contracts do not have well-spelled-out clauses that provide clarity on pre-employment termination, leaving the rules and your options unclear. This ambiguity often benefits the employer, and pushing for clarity during contract negotiations can backfire. Asking for a clear exit clause before your start date may raise red flags, as employers invest significant time and money in recruiting and may view such a request as a sign you’re not fully committed.
Some contracts have a “Signing Date” and, separately, an “Effective Date,” which typically corresponds with the day you’re supposed to start employment. You’re potentially in better shape when the Effective Date has not yet occurred. However, if the Effective Date is styled as the day you signed the contract with a separately defined “Start Date,” this will suggest the employer has stronger legal rights because the contract has been made effective.
2. Termination Without Cause Clauses
In some cases, you can rely on the termination without cause clause, which typically allows you to terminate with 90–180 days’ advanced notice. If your start date is beyond that window, this might be a viable exit. However, some employers may argue that you must begin work and then provide notice on your first day, effectively requiring you to work through the notice period. While uncommon, a few employers do push for this, even though it creates an awkward and brief employment relationship.
3. One- to Three-Year No Out Contracts Are Problematic
A bad scenario is when the physician has an initial “no-out” period and does not have the legal right to terminate without cause. Here is an example of what this might look like in a contract:
Termination Without Cause: After the Initial Term*, Physician or Employer may terminate without cause at any time by providing advanced notice of 90 days (“Notice Period”). Employer and Physician shall continue providing services and compensation for the duration of the Notice Period. Employer may waive all or part of the Notice Period, but must continue Physician’s Base Salary for the duration of the Notice Period.
*Here, the Initial Term was defined as three years. This means the employer and physician have no right to terminate without cause during this period.
In the firm, we estimate that about 10%-20% of physician contracts do not allow the physician to terminate without cause during the first 1-3 years, making termination before the start date much more complicated. The employer may have a viable legal claim that you owe them at least that much work before you can terminate, including a potential legal claim for monetary damages if you don’t comply. If this is in your contract, we recommend ample caution!
4. Early Termination Damages Clauses
Some physician contracts have a specific clause speaking to what happens if the physician signs the employment agreement but never starts employment. They might have a specific buy-out clause, often in the 5-figures, or they might have a vaguer ‘substantial damages’ clause. Here is an example:
Physician understands that Employer is relying on the Physician’s agreement to begin work on the Start Date. If Physician does not start work on or terminates employment before the Start Date, Employer will experience substantial harm and will incur monetary damages. These damages may include the cost of finding a replacement, lost services, and other damages from breach of contract. Unless there is a genuine emergency or incapacity that is approved by Employer in good faith in advance of the Start Date, Physician agrees to compensate the Employer for any and all actual damages caused, along with reasonable attorney’s fees.
They may claim monetary damages against you related to the time and costs associated with recruiting and filling your replacement, and these costs can be substantial. We have seen contracts that provide for a $20,000 to $50,000 penalty if you back out after signing. If this is in your contract, we also recommend ample caution.
5. One-Off Sweetener Repayment
Additionally, you will almost certainly need to immediately pay back anything they have paid you, including signing bonuses, relocation stipends, training stipends, or anything else. There may be interest penalties that attach, and the contract will often dictate these. If you’ve already spent these funds and cannot return them immediately, please know that employers can and will sue you to recoup the payment.
Many physician contracts include attorney’s fees clauses that say the unsuccessful party in a legal dispute must pay the prevailing party’s legal fees. Paying the employer’s legal fees could be an additional 5-figure penalty, on top of any legal fees you may incur in defending the legal claim.
Finally, most lawsuits are public information. Having a lawsuit filed against you under unattractive facts could have a meaningful impact on your career down the road.
6. Is The Noncompete Enforceable?
Your noncompete could be enforceable from the date of signing, meaning that you might be subject to complying with any noncompete restrictions in your contract even if you never worked for them. If you’re considering a new opportunity within that employer’s noncompete radius, you’ll likely be required to disclose this to your second employer. Many employers will pull offers if they come with even a potentially viable legal dispute. We have not had the need to fight this specific scenario in the firm yet, but I could see an employer claiming a viable legal claim for violating the noncompete. This often will not be spelled out perfectly in your contract.
Summary
Please do not sign your employment agreement with a plan of backing out if you get something better soon. This can spell trouble for you, and damages could be substantial. If you find yourself in this situation, the best practice is to not DIY your termination. Get with a lawyer who understands physician employment contracts and thoroughly evaluate the potential impact before you proceed.
