Employment contracts of any kind can be complicated. The parties often must spend significant time thinking about: How long does this job need to last? How much does it cost? What if I am not satisfied with the other parties’ performance or quality of work? And much more! Unlike other professions and trades, there is not really a “job done” conclusion in the physician sphere, as in construction or artistry. A physician’s services will be necessary and needed in perpetuity, so the previous questions still apply. However, there is an important consideration to be had for how long any particular job will last and whether you retain any control in the decision to continue the employment relationship or not.
This blog explores what we as physician contract lawyers see daily in practice, with a focus on what a contract can outline versus what it should outline when the physician wants to leave or other circumstances prompt exit. We will further examine the practical considerations any physician must have as they evaluate their prospective employment options.
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The “At-Will” Employment Doctrine and Contracts
Except for one state, the predominant employment philosophy across the country is “at-will.” If you held a job in high school, college, etc., it likely didn’t involve a contract, and thus you or the employer could terminate the employment relationship whenever either party saw fit (only for legal reasons, to be sure). This is an essential component of “at-will” employment: the parties retain the discretion to work together but can separate just as easily.
In the physician employment world, however, you will rarely come across a position that offers employment with no contract. If you are considering private practices, some may feel an employment contract is unnecessary and thus won’t have a document to offer. This isn’t necessarily a “red flag” that should put you off from the position, but it will come with its own host of considerations when deciding to pursue the role or not.
Physician employment contracts are highly likely to modify the “at-will” employment doctrine. This is because there are typically specific terms in the contract that explain how long the relationship will last and methods for termination, if any.
Sometimes there is confusion here, where an employed physician who has an employment contract incorrectly assumes that, because the state they live in is “at-will,” they can leave whenever they want. This is almost certainly not true, and whatever terms are outlined in the contract, modifying the “at-will” doctrine will control the employment relationship. Simply ignoring those terms can open you up to significant legal liability. This is a very fact-specific inquiry, and you should seek legal counsel to help you identify what the terms of your contract mean in light of the “at-will” doctrine.
Negotiation points:
- Don’t ignore this contract clause – it supersedes the “At Will” doctrine.
The Termination Without Cause Clause: Your Unlikely BFF
Termination without cause carries a negative connotation. It sounds like an unfair method for the employer to say, “Hey, we just want you out, have a nice life.” While there will always be some risk that the employer arbitrarily wishes to terminate the relationship (again, only for legal reasons), this clause is necessary and hopefully strikes a balance between the parties.
That balance comes from a prescribed amount of notice to be given in termination without cause situations. The contract should provide for a reasonable amount of advance notice to the other party prior to termination. The amount of advance notice required often depends on the employer’s staffing needs, notice to patients, business protection interests, and more. So, we see a range of required notice periods, being as few as 14 days to as much as 180 days, depending on the particular employer.
Negotiation points:
- When evaluating the notice period, best practice here is to consider your financial status if you were the one terminating, as well as if the employer opted to terminate! It takes time to transition jobs in the physician space, with the licensure, credentialing, and privileges acquisition processes taking months to complete in a lot of cases. So, what amount of time represents a safe “off-ramp” that would minimize financial stress as you make your exit? Other factors, like patient abandonment, could play a role in how much notice should be required in a particular setting. The amount of notice required to be given can often be a fruitful negotiation point, so be thoughtful as you prioritize your negotiation strategy!
- The clause should be balanced. If you must provide 90 days of notice, they should too. Some employers want to make this ‘optional’ on their side, and we often recommend negotiating for a balanced application. Lopsided clauses can create financial struggles during an exit.
Termination For Cause
Any business, whether a medical practice or not, will want to retain some authority to dismiss an employee immediately if they have a valid reason to do so. In fairness, should the employer have to deal with a 90-day notice period and continue to pay you your salary and benefits if you lost your medical license? Similarly, should an employee be stuck in the position for a certain period if the employer has breached the contract in some way? Of course not, so the contract usually has a non-exhaustive list of reasons that the parties could use to end the relationship immediately.
Occasionally, we will come across for-cause termination provisions available to the employer that are ill-defined, overly broad, or even plainly inappropriate. One such example would be allowing the employer to terminate immediately if they found, in their sole discretion, that you were not a profitable employee or that they believe you are inadequately performing. There are a lot of factors that play into employee profitability, and many are outside of the employee’s control in a lot of situations, so why should the employee suffer immediate termination?
Negotiation points:
- It takes a keen eye to make sure there aren’t inappropriate clauses in the for-cause termination sections. Be sure to seek experienced legal counsel to know what to expect here and when it’s a good idea to negotiate. We often consider striking the most vague, one-sided clauses.
- For “for cause” clauses that can be remedied, you may want to negotiate for a 30-day notice and opportunity to cure the issue before termination. This is ideal for issues like violating employer policies and procedures.
Term Length and Utility of Termination Without Cause
Does my employment contract obligate me to stay for a certain period of time? That notion is mostly correct, as a contract often identifies how long an employment relationship will last. However, in the physician contract sense, these relationships are often indefinite! Most employers may outline an indefinite term, or an “evergreen” renewal clause, saying the contract renews automatically in certain increments. We will occasionally encounter a contract that expires after a few years, which begs the question of what should happen at that time if the parties wish to continue working together.
If your employment contract is for an indefinite period, how do you get out!? This is where the termination without cause clause is vitally important. Hopefully, that clause is drafted in such a way as to give you the unilateral right to notify the employer, at any time, that you will be terminating at the end of the required notice period.
Sometimes we see the termination without cause clause requiring certain conditions to be met before the parties have a right to use them, which usually is a requirement to be employed for a certain amount of time (often somewhere between 1 and 3 years). If this is the case, then you may have to devote that particular amount of time before you can safely terminate the relationship. We find that if a particular employer has a tough time recruiting and retaining staff, they may resort to a more “locked-in” structure like this.
Predominantly, however, most physician employment contracts allow either party the option to terminate without cause at any time, so long as they provide the requisite notice. So, while it is important to understand the term length of the contract, it often has little influence on how long or short the duration of employment will be. For illustration, you may have a contract that specifies a 3-year term. If there is a termination without cause clause that does not specify any other conditions, then you could provide your notice of termination on your first day, and your only obligation would be to fulfill whatever that notice period is! Thus, emphasis should be placed on understanding the termination without cause clause or negotiating one into your contract.
Negotiation points:
- Generally speaking, we are not fans of “No Out” initial terms, and you may want to negotiate for the option to terminate without cause at any time.
- We also prefer auto-renewal in most cases, and encourage physicians to consider renegotiation when it suits them, not on some arbitrary timeline set up by the employer.
Termination Disputes
Here are a few clear dos and don’ts:
- If the employer is terminating for cause, or your employer has noticed a violation and a short time to remedy under the threat of termination for cause, immediately consult a lawyer. You need to understand your rights and obligations and get guidance from here. It’s possible that the reasoning is valid. If so, you may be best served by utilizing counsel to help you negotiate a termination without cause or “mutual agreement”, avoiding the employment and career impact of a termination for cause. If not, it may be time to prepare for a legal dispute. At the end of the day, you’re likely leaving this job, and it’s better to leave without cause and with as much financial support as possible. This is where experienced guidance can save you.
- If you are terminating without cause, you will almost always be best served by expecting to serve out the entire notice period, in good faith, and in the same way as if you were not terminating. Hot-dogging the end can cause lots of problems, and employers sometimes look closely to see if they can terminate you for cause and avoid full payout. Mind your Ps and Qs.
- If you are terminating without cause, you can ask the employer to voluntarily shorten the notice period (if you also want this), or you can confirm that you want the full notice period to be honored. Many employers don’t need you to serve it out in full, and it depends on the situation and if it benefits you. You’re likely not best served by “demanding” an early release, but there can be room for mutual compromise here.
- If the employer is terminating without cause, the same analysis applies. You may want to ask them to voluntarily shorten the notice, but you may also want to affirm your contract right to full support and payout. It just depends on the situation.
- If your termination notice period is long and you’re well-paid, we’re seeing some employers try to drum up thin for cause reasons to push you out and pay you as little as possible. We have disputed and settled many cases like this. Get help!
- If you’re offered a “Separation Agreement”, “Severance Agreement”, or some other contract that includes waiving your legal rights upon separation, always get with a lawyer before negotiating and signing.
Conclusion
In sum, there are a lot of nuances that make up the term and termination clauses in a physician employment contract. While the above explains a lot about what we experience evaluating contracts across the country, every position is unique, and every physician’s goals can differ. You could use a thoughtful guide as you consider the implications of these clauses in your prospective roles, and an advocate who can assist with negotiations should things need a change. Click here to set up an initial conversation with an experienced attorney!
