Physician Contract Restrictive Covenants
What are Physician Contract Restrictive Covenants?
Restrictive covenants are essential things you can’t do. Many times, it’s when the contract is in effect and then for a period after the contract ends. The general and regular restrictive covenants would be a non-disparagement clause, non-compete, and a non-solicitation agreement. These are things you can’t do.
Let’s go through each one. Non-disparagement clause, simple. When the contract ends, the employer wants you to agree that you will not badmouth them. There will be no disparaging comments for the physicians of the employer and the staff of the employer. If you have a non-disparagement clause in your contract, it should go both ways. Understanding and negotiating these clauses is a key aspect of understanding how to negotiate a physician employment contract.
I would ask them if it just says you can’t say anything bad about them. I would ask them to make it mutual, meaning it just takes the same paragraph and reverses the parties so they can’t badmouth you after the contract ends.
Next is the non-compete. This one is easily the most important in the physician contract.
A non-competition clause will state that you can’t work within a specific specialty for a period within a defined geographic region. Let’s take a cardiologist as an example. The non-compete will state that you can’t work in cardiology for one year after the contract terminates within 15 miles of the primary practice location. The crucial parts of any non-compete are the definition of the specialty. Some are boarded in multiple specialties and can do different things, like a hospitalist. For further information on healthcare specializations and agreements, consider visiting the American Medical Association.
If you’re in internal medicine, you can do hospitalists, you can do ED, and you can also do urgent care. And you need to limit the definition of the specialty to what you are doing for that employer. In a similar vein, it’s crucial to understand what is a physician collaborative agreement which can also impact your work as a physician.
Negotiating Details in the Non-Compete
If you are, as I said before, working for a hospitalist a hospital. Then you want to have the opportunity to do primary care, ED, or urgent care for that year. And then you can switch back to being hospitalists in that area if you want to. That’s the first part. Now, how long should it be? Well, most are somewhere between one to two years. The American Academy of Family Physicians offers some great resources for better understanding these issues.
In most states, one year is considered the enforceable amount. If you have a two-year non-compete, you would ask to limit that to one year. One year is fair. I don’t think any state will find that a one-year non-compete isn’t fair. That is, unless it is a state that completely finds any non-compete unenforceable. There are a few states like that, but we’re talking about states that can enforce it.
If you have a longer than one-year non-compete, you want to cut that down to one year. And then the most crucial part of a non-compete is the definition of where you can’t practice. The simplest way would be you can’t compete or have a job within 10 miles of the primary location where you work.
That’s simple. Like you can’t work within 10 miles, as the crow flies, it’s not a street 10 miles away. It’s just sticking a pin 10 miles around. Suppose an employer has multiple locations or potentially if the physician is working. Maybe not only in an outpatient clinic, but they’re working in a hospital or various hospitals. It would help if you were careful about defining the restricted sites.
Is it just your primary site? Is it every site that the physician owns? Is it just the sites that you worked at? You want to limit that as much as possible as well.
Considering Employer’s Number of Business Locations
I mean, one trick is to say if they have multiple locations anywhere where I’ve generated more than 35% of my charges. That way, it can only be two locations when you do the math on that one. That’s where the fight matters. Suppose you’re with an enormous employer with 20 locations in the city, saying it’s 10 miles from 20 sites. I can’t imagine any court would find that reasonable or enforceable in that case.
However, you want to refrain from signing an agreement that you expect to break or not enforce. That’s just a bad idea.
So, those are the three kinds of main restrictive covenants: the non-disparagement clause, non-solicitation agreement, and non-compete.
We need to go over the non-solicitation clause.
That means, for a period, you can’t actively solicit patients, employees, independent contractors, or vendors. And so, the vital part of that is soliciting. Let’s take the patient’s position. Actively soliciting a patient would be downloading a list of all your patients with the employer.
Then blasting out an email to them and saying, I’m leaving the practice. I’m opening my practice, and please come with me. The non-solicitation clause would prohibit that.
A Brief Example of a Non-Clause
Now, if the patient reaches out to the physician and says, hey, I hear you’re leaving. Where are you going? That’s not an active solicitation. That would be okay.
Regarding soliciting employees, let’s say you’re opening up your practice outside the non-compete area. Suppose you’re interested in bringing an MA, a nurse, or an office manager to the front office. A non-solicitation clause would prohibit you from actively soliciting that person to come with you.
Many savvy employers will have a ‘you cannot hire them.’ Suppose I was writing a contract for practice. I would ensure that it doesn’t just say you can’t solicit them. I would also tell you you cannot hire them. But in that scenario, it depends on what the language is. Still, you couldn’t actively solicit the employees or potentially not hire them. So, that’s a brief example of a non-clause.
What to Know Before Signing Your First Physician Contract | Contracts
What should you know before you sign your first physician employment contract? This question is a broad topic, but we’re going to hit the main areas and things to consider before signing your first employment agreement.
Ways to Determine if Compensations Offered Are of Fair Market Value
First, determine whether the compensation they’re offering you is fair market value. There are a couple of good ways to find that.
The MGMA, the Medical Group Management Association, collects annual salary data nationwide. If you can access that, they have a lot of good information about total compensation, average net collections, and average RVUs generated by specialty. It’s hard to get that info sometimes.
I mean, if you Google around, you might be able to find some of the compensation data that’s a couple of years old. Or you can talk to someone who has access to the data, like for our firm, we have access to the data. So, we can tell the physician exactly what the numbers say. Now, that’s certainly not the be-all-end-all.
There are other services out there that offer something similar. But I also think it’s limited because some specialties have a tiny sample size. In addition, the total compensation should not be the determining factor when looking for a job. Alright, so that’s compensation.
Another way of thinking about it would be if you have classmates in your training program, ask them what they’re receiving. It’s going to vary based on geography and then setting. Are they going into a hospital network or a federal facility? Or are they going into private practice in some way? It is good to speak to people you train with to see what offers they got. And then mentors are another excellent place.
How to Terminate Contracts
If someone is already out and maybe they’ve been a teacher for you or a mentor, ask them if they’re willing to talk about the compensation they’re receiving. Next would be how to terminate the agreement. Something you need to consider.
There are four ways to conclude a contract if the initial term ends.
- Let’s say you have a two-year contract, and no language states it automatically renews.
- It just ends, and the contract terminates.
- You can end a contract by mutual agreement.
- Then you can also terminate a contract with cause. So if one of the parties breaches the contract, either party can terminate the contract if the other party doesn’t fix the breach. It’s called a cure.
- And then lastly, and this is what I want to hit on, is without-cause termination.
Every contract you sign must have without-cause termination in it. There are minimal circumstances where no without-cause termination would be okay. If you’re a J-1, that one would probably benefit you not to have that in there. But without-cause termination means you can terminate the contract at any point, for any reason, with a certain amount of notice to the other party.
Contracts that don’t have without-cause termination, meaning you must work out whatever the initial term is. There’s no way of terminating the contract for any reason. They would have to breach it if you wanted to get out of it.
Why Do I Need No Cause Termination on My Contract?
The reason why you need that is, let’s say you start with the job, paid on productivity, and the volume is not there. It’s not your fault, or maybe the employer brought you in, telling you it would be one way, and the call is just excessive.
Or perhaps it’s just a terrible personality fit; whatever reason you’re not happy in that job, you need the ability to get out of it if you want. So, it would be best to have without-cause termination in the contract. Somewhere between 60 to 90 days is standard for physicians.
Legal Mistakes Physicians Make Are Not Going Through Non-Compete
Alright, next, the non-compete. A non-compete says the physician can’t work after the contract terminates for a period within a specific area. For example, most non-competes are one year, sometimes up to two.
And then, a reasonable mileage would be 10 to 15 miles from your primary practice location. Often, the employer will try to tag multiple locations. So, maybe if you worked in three outpatient clinics in a hospital. They try to attach it to all four of those, or perhaps the employer has many facilities in the area.
You’ve only worked at one of them, and they might try to attach it to all the facilities they own. That’s not fair, either. You want to get it to one year, 10 to 15 miles from maybe, at most, two locations. Anything beyond that would be considered unreasonable. There are a few states where it’s entirely unenforceable to have a non-compete. But for the most part, most states allow non-competes for physicians.
Health Care Malpractice Insurance, Do Not Practice-Without It
Lastly, the employer should almost always pay your annual premium with malpractice insurance. How much must they pay each year to insure you? Depending upon the policy, whether it’s a claims-made or an occurrence-based approach, it will determine if you must pay what’s called tail insurance.
If it’s a claims-made policy, tail insurance is necessary. A good rule of thumb is that tail insurance costs about twice your annual premium. In some specialties, it can be costly. OB-GYN, some of the higher-level surgical things could have tails that are fifty to a hundred thousand dollars. You want to avoid having to pay for that.
So, make sure that there’s either a fair split between the employee and employer or having the employer pay the total cost of the tail insurance, or there’s also insurance called occurrence-based coverage. And in that scenario, tail insurance is not needed at all. It’s about a third more expensive than claims-made, but you won’t have to pay for tail insurance in that scenario.
Now, you need to think about dozens of other things. Those are the foremost important ones. But you have benefits, bonus structure, contract length, other restrictive covenants with the non-solicitation agreement, non-disparagement, confidentiality, your hours worked, and the call. It would help if you thought about a ton of things.
So, I suggest reaching out to someone with experience reviewing contracts. When you’re signing a contract worth a million dollars, I think it would be foolish not to get it looked at by someone who knows what they’re doing.
Hospitalist Contract Negotiation: Physician Negotiating Tips
Do you want to know how to negotiate hospitalist contracts?
I have some good and some bad news. The good news is that a hospitalist can negotiate certain areas within the employment contract. The bad news is that one of the main areas where it’s difficult to negotiate is the base salary or hourly rate.
There are two ways a hospital can be staffed. Either the hospital employs them, or there’s a staffing company/physician group that contracts with that hospital to staff the hospital with hospitalists. Most companies want to keep the rates standard, especially if there’s an hourly rate involved. The variable for any hospitalist job is the base salary. And the shift expectations per year, month, or hourly rate, usually with the shift differential.
Main Areas of Hospitalist Employment Contract That You Can Negotiate
When the hospitalist negotiates, the company will typically push back and say, “Look, we want to keep the rate standardized.” The physician is going to talk. There will likely be friction if one person makes $20 more than another. So, suppose it’s an hourly rate position. In that case, getting the organization to move off is challenging.
Contract negotiation can be complex in this case. Some movements and contract agreements are reachable if it’s just a base salary. However, there will be a narrow range of actions on base salary.
And then, as long as the shifts are required, they can move them. In some places, the longer the physician has been with that company or hospital, the more their expectations may change over time. And that’s a place that we can sometimes negotiate.
The areas of the employment contract that you do have some movement on would be:
- The signing bonus,
- Relocation assistance,
- Non-compete scope,
- Nose coverage,
- Whether they pay for your tail when you’re leaving
What Is a Fair Signing Bonus for a Hospitalist?
I’d say those are the main areas where there is some movement. Now, how does a physician determine what’s a fair signing bonus for a hospitalist?
Well, it depends on where you are in the country. Suppose you’re looking into a facility that’s in a difficult location to staff. More rural communities without large cities around them are always harder to staff. That’s just the reality. And so, the hospitalist has more leverage in asking for a higher signing bonus.
Some communities will not only provide a signing bonus. But they can also offer student loan assistance where they’ll pay a particular portion to the company that has the student loans. Usually, that can be substantial, somewhere between fifty to a hundred thousand. But as far as the signing bonus goes for a hospitalist, I’d say anywhere between 10,000 and 50,000 could be a normal range. And then you certainly want to ensure that the organization is also paying for your move.
Can the Bonuses Be Negotiated?
One thing to remember, especially for hospitalists coming out of training, is that the timing of those bonuses can also be negotiable. You’re in residency, and you don’t make a ton of money. Some people don’t have $15,000 to put down for action because, most of the time, they’ll state that they will reimburse you.
One of our negotiating points is having the employer pay the cost directly to the moving company. And have them provide the signing bonus upon executing the document and signing it, and not just when the hospitalist starts the job. A non-compete can be necessary as well.
Now, if you’re in a one-hospital town, a non-compete has almost no effect on you because it needs to be reasonable. Something reasonable is usually between 5 to 15 miles and one year.
But if you’re in a large metropolitan area, and you want to stay in that city, decreasing the radius of the geographic restriction certainly is something that we would look to do as well. And then, with malpractice insurance, you can sometimes work on whether the organization provides tail insurance.
A good rule of thumb in tail insurance is that it’s usually about twice your annual premium. For hospitalists, it’s probably somewhere between 7,000 to 10,000. So, your tail insurance cost would be 14,000 to 20,000, something like that.
Is it possible to negotiate points in a hospitalist contract? Obviously, yes. Getting any movement, base salary, or a little action is strict. Still, the signing bonus, and non-compete, which pays for tail insurance, are the areas that you should focus on.
What Can You Negotiate in a Physician Contract?
What can a physician negotiate in an employment contract?
The short answer is everything. It ultimately depends upon the willingness of the employer as to whether they’re willing to negotiate terms or not. Extensive hospital networks are less likely to change an employment contract agreement significantly.
Unlike if a physician is looking into a physician with a smaller physician-owned practice, there’s much more leeway for significant changes. What are the things that are important to the physician, and then what are the things that they can get changed?
In my mind, when I’m talking to a physician, the things that stick out as the most important would be:
- The signing bonus,
- Relocation assistance,
- How to terminate the contract agreement,
- Make sure there’s without-cause termination that’s a reasonable length,
- Productivity bonuses,
- Tail insurance and,
- Who pays for tail insurance if it’s a claims-made policy?
First Physician Contract Negotiations
Let’s go through each of those and come up with some tips on negotiating. First, as far as compensation goes, the physician needs to know their and their specialty’s value. Getting the MGMA data is helpful. It is beneficial to talk to colleagues about the offers they’re receiving or what they’re currently making in different organizations.
Sometimes, the associations for each specialty can provide information on your specialty’s average salary. That’s one way to look at it. As far as productivity goes, this is more difficult. It’s going to be entirely based on the arrangement. Is it a hybrid between a base salary and RVU production? A base salary and net collections? Is it all RVU? Is it all net collections?
This one is dependent upon the type of structure. You’re getting a base plus a certain amount of its net collections or a hybrid model. Let’s say. For instance, the expectation was 20,000. Anything collected is over 20,000 by the practice, and the physician will get 15 to 25% of that. That would be a standard percentage.
If the physician is purely on net collections, around 40 to 45% is average. As far as RVUs go, there are two things you can negotiate: the threshold, meaning how many RVUs you must generate to get a certain amount, and the compensation factor, which is the monetary value associated with the RVUs.
That has some leeway as well. Regarding signing bonuses and relocation assistance, the main things are the actual number, obviously, but more importantly, what’s the repayment schedule?
Forgiveness Period in Physician’s Contract
Almost every contract is going to have a forgiveness period. Let’s say the physician gets a $20,000 signing bonus, and the initial term of the contract agreement is two years. Usually, they’ll have to stay for that initial two-year term to have the entire $20,000 forgiven, so they don’t have to pay anything back. The same goes for relocation assistance. Between $10,000 and $15,000 should be the cost of relocation assistance. The signing bonus can vary widely from 10 to 75. That one is specialty-dependent.
As far as non-compete goes, this does vary state by state on what it considers reasonable. There are a few states where it’s wholly unenforceable; California and Mexico, for instance. Usually, the non-compete shouldn’t be any longer than a year. The geographic restrictions should be 5 to 15 miles from your primary practice location. Where to negotiate with this?
Terms That You Should Know About Physician Contracts
You want to keep the length at one year or shorter. You want the non-compete to only apply to a few locations. Some employers will say the non-compete applies to every facility we own in the city. Instead of having one office within 10 miles, you could have 30. So, that’s very important. And then specialty as well. Some specialties can do multiple things.
Let’s say you are in internal medicine. You can be a hospitalist, and you can go into family practice. You can do urgent care. If the non-compete states that you can’t practice medicine within that geographic restriction, you’re out of luck. Whereas if you keep it to the specialty of what you’re providing to that employer. Specifically, in this case, let’s say you are a hospitalist.
You could go to family practice or urgent care for a year, and then when the non-compete ends, go back to being a hospitalist. That’s something to consider.
Also, malpractice insurance is always a considerable discussion with the physicians’ coworkers. First, you must identify whether it is a claims-based or occurrence-based policy.
If it’s a big hospital, they might be self-insured. And after you determine what type it is, if it is a claims-made policy, tail insurance will need to be purchased after the contract terminates. And then who pays for that? Most of the time, if you’re in a small private physician-owned practice, the physician must pay for tail insurance when they leave. You rarely have to pay for tail insurance with an extensive hospital network. Now, tail insurance usually costs about twice what your annual premium is.
Physician Employment Contracts & Learn the Negotiation Tips
Your family practice’s annual malpractice premium is somewhere between $6,000 to $8,000. If you had to pay for tail insurance, it’s somewhere between 12,000 and 16,000. One thing you can negotiate is who pays for tail insurance coverage. Sometimes an employer will say if you’ve been with us for one year, we’ll pay for a quarter, then two years, half, and then three years, 75%. Some ways of getting out of having to pay the entire amount depending on the situation.
Now, I first talked about whether the employer was willing to negotiate. Some employers will say this is a take-it or leave-it deal. I don’t think those employers will be great for getting together. If an employer is unwilling to budge on anything, it will likely be challenging to team up.
It means they’re not going to accommodate the physician somehow. So, I caution any physician who has received a job offer. We ask for some clarification or certain concessions, and they say no, this is it. That’s usually a red flag. And I tell the physician that you may want to continue looking for a job because this might not be a good fit for you.
Anything in the contract is negotiable. You need to figure out what’s most important to you. Sometimes, a non-compete is absolutely the number one thing. For others, it’s compensation. For others, they do not have to pay tail insurance. It depends upon the physician’s wants and needs and then tailoring the negotiations to get them to that point.
What Is Without Cause Termination in a Physician Contract? | Physician Termination Agreement
What is without-cause termination in a physician contract? Essentially, it allows either party to terminate the contract agreement at any time. For any reason, with a certain amount of notice to the other party. Without-cause termination is essential because if a physician enters a job, everyone expects a position to be great, right? You don’t take a job hoping you want to leave immediately, but things change, or it certainly can be different once you start.
Let’s say a physician takes a job. After a few months, it’s clear that it’s not a good cultural fit, or maybe they’re on productivity compensation. Whatever the reason, they’ve decided. I do not want to stay here. And so, without-cause termination will allow that physician to give notice, work out a period, and then move on.
Average Length of Without Cause Termination Notice
The average length, or at least the standard for most without-cause termination notice periods, is somewhere between 60 to 90 days. Anything higher than 90 days causes a couple of problems. Anytime somebody gives notice, the dynamics will change between the physician and the other physicians or the organization itself.
You’re no longer in the long-term plans. Sometimes, there can be insufficient blood as well. And so a shorter period to have to work out whatever is advantageous. It’s just better. If you had a 180-day notice, you’re there for six months dealing with a potentially awkward environment.
Another thing to consider is the longer the lead time, the harder it is to find a new job. If you’re coming out of training, everyone comes out at the same time. So, all employers understand this. And there’s a rhythm to when they offer jobs and start onboarding and all that type. If you’re out, you’ve been out for a while.
And then you decide to switch. It can be anytime, but most people don’t post for jobs six months in advance. They will say, we have a need now. If you have a six-month notice requirement for your job, you may lose out on job opportunities because they need someone much faster than six months.
And so, they’re going to find somebody and leave you in the dust.
Two main reasons: don’t put yourself in a toxic environment for an extended period, and two, help shorten it down so that you can find a new job more efficiently. In the physician contract, it’s going to state how much notice you must give.
How Much Notice Time Do You Need to Terminate an Agreement?
Let’s say it’s 60 days. It must also be in writing. You can find it in the physician contract under the termination section, which will say without-cause termination, for no good reason, or something like that. And then it’ll just state that either party can terminate the contract agreement with a certain amount of notice to the other, as I said before, in 60 days.
There’s another section in your physician contract called notice. It will state exactly how you can notify the employer and whether it needs to be certified mail or hand-delivered. Most physician contracts don’t have email. Indeed, there’s no verbal acknowledgment, no fax.
If you were to tell your boss, “Hey, I’m leaving in 90 days,” do not give them a written letter stating you’re going. As a result, they could force you to work for another 60 days until you give them adequate notice.
So, those two sections. Look into the without-cause termination section to see how long or how much notice you must give. Then the notices section. Ensure that you can provide adequate notice.
I’ve had a couple of times where physicians have called me after the fact and said, “I emailed my boss. It was 60 days’ notice. I waited 45 days and then came back and told me I didn’t provide them effective notice. And now, they’re saying I must give them another 60 days.”
Well, it’s vindictive on the part of the employer. They were mad and did that just to kind of screw with the physician.
What Happens if a Physician Does Not Give Effective Notice
But if you don’t give adequate notice, it doesn’t count. Ensure you’re both offering the right message and following the notice section.
Now, what happens if you decide to leave a job and don’t give the proper amount of notice? Well, many physician contracts will have penalties associated with that. For instance, a common way of doing it would be to penalize the physician. They didn’t give enough notice of whatever their average daily rate was for every day. If it was 60 days and they only gave 30 days, they’d owe 30 days of their average pay to the employer. Average pay could be a significant amount of money.
You want to ensure that you give as much notice as required in that without-cause section. Therefore, you can’t be penalized. Employers could come after you for recruitment costs, locums to cover your shifts, or if you’re an outpatient or something like that. It’d be rare for them to do that. However, you are opening yourself up to liability if you fail to give them the specified amount of notice in your physician contract.
Can Physicians Terminate a Contract Without Notice?
Can a physician terminate an agreement without notice? Can they leave a job without notice and move on without repercussions? The answer is that you can go without notice. Still, there will be legal implications, and you are opening yourself up to liability for a few reasons.
The first reason is that there will be a termination without-cause clause in almost any physician employment agreement. Sometimes it’s called for no good reason. And in that scenario, the physician contract will state that either party can terminate the agreement with a certain amount of notice to the other party. So, terminated physician contracts don’t need a reason. No one has breached the physician contract, or maybe nothing is wrong.
It’s just the physician who wants to move on. The employer may be laying off the physician due to lack of volume or something like that. The physician contract states that either party can terminate the agreement for any reason. However, they must provide a certain amount of notice, as stated in the physician employment physician contracts. Most of the time, it’s either 60 or 90 days. That’s the standard. In that scenario, let’s say the physician wants to leave.
They would, in writing, provide notice to the practice that says, under the physician contract, I’m giving you 60 days’ notice. My last day of providing care will be X date. Then you move on with your employment. Just because you terminated the physician’s contract without cause doesn’t mean there aren’t some problems for you or at least issues you need to deal with when it’s over.
Things to Consider in Terminating a Physician Employment Contract Agreement
Some things that will follow when you terminate a physician’s contract without cause, or at least usually follow, there will be a restrictive covenant. And that is either a non-compete or non-solicit in the physician’s agreement. In terminating an employment agreement without cause, they will still apply.
What are the restrictions on my practice after I leave the employer? Many employers will have repayment obligations for bonuses they’ve paid out.
If you start employment, then leave within a year or two. The employer will prorate that bonus based on how long you’ve been there since you started. Say they gave you a $30,000 signing bonus, and your initial term was three years. The employer may say that one-third of that $30,000 is forgiven yearly.
So, if you were to leave between years two and three, you’d owe them back $10,000 at the end of the physician contract. The same goes for relocation assistance. They gave you some money upfront. Usually, it’s forgiven over time. Then you’d have to pay back whatever the outstanding amount is.
What if Your Physician Employment Contract Includes a Productivity Bonus?
Another thing to think about if you terminate a physician contract without cause is if you have a productivity bonus in the physician contract, either net collections or RVU. Many will state that if you’re not employed when the compensation is given out, you will not get it. Or maybe if it’s like an annual bonus, they won’t prorate it either. The timing of when you give that notice is essential, so you’re not losing out on whatever productivity bonus you earned.
What Will Happen if Your Medical Contract Contains a Claims-Made Policy?
The last thing that can usually follow is if you have a claims-made policy. Who’s going to pay for tail insurance? If the physician is responsible for tail insurance, they must pay that amount before the contract ends. And that can usually be between ten and a hundred thousand for an OB-GYN or a high-level surgeon.
Is It a Good Idea to Terminate a Physician’s Contract Without Notice to the Employer?
What happens if you don’t provide notice to the employer? In the physician contract, as I said before, there will be a clause that says you can terminate the physician contract without cause with this amount of notice.
So, what happens if you don’t give any notice? You walk in on a Monday and say this job sucks. I’m out of here. You walk out, and that’s it. Well, you’re in breach of the physician’s contract.
What are some things that can happen when you breach physician employment contracts?
Well, the employer could assert damages. This means lost revenue for the patients you would’ve seen don’t have coverage for recruitment fees for replacing the physician.
Also, expenses are incurred when there’s no physician to be there with staffing or vendors. And so, how that would work is the employer would sue the physician for breach of physician contract. Then they would claim those damages, then fight it out in court, or if there’s an arbitration clause, they will arbitrate. It’s a terrible idea to walk out on an employer if there’s a without-cause termination clause.
Physicians, Remember Continuity of Care for Patients
Another consideration is the continuity of medical care for your patients. What would happen to your patients if you were to leave a job without providing any notice?
Although employed, they may be your patients. They are the employer’s patients. So, the physician couldn’t just take all the patients to a new practice. There’s probably a non-compete and non-solicit that would prohibit that in some legal way.
Now, patients can choose their provider, and I’m not going to get into that right now. But the continuity of care aspect is something that one needs to consider. Are there bridge scripts written if they’re maybe psych patients absolutely in need of medication? Has there been any opportunity to refer the patients out to someone else? Is there someone in-house who can take over the patients?
Not only could you get sued for damages, but if you just up and leave all the patients in the lurch, you’re also asking for a board complaint, and nobody wants to deal with their state board. I promise you I’ve represented hundreds of professionals before the licensing boards, and it’s not a fun process for a provider.
So, can you terminate a physician’s employment contract without any notice? Yes, but it’s a terrible idea that could open the physician to many problems.
What Is the Best Without Cause Termination Length in a Physician Contract?
Nearly every physician employment contract contains a provision that allows either party to terminate the agreement for any reason with a certain amount of notice to the other party. The typical amount without-cause termination notice is 60 or 90 days.
Terminating employees is an important business decision. There are two types of terminations: with cause and without cause. To fire someone for violating company policies or committing unethical acts can be justified as termination with cause.
But firing them for poor performance alone may not be enough to discharge the employee; this type of dismissal should instead fall under “termination without a call.” You must understand which kind of your termination is before making a final decision on whether or not it would have adverse consequences in other departments within your organization.
Termination Without Cause
Terminating an employee without cause is a common practice among private employers. This dismissal can occur for several reasons, such as budget problems, operational restructuring, and downsizing. The phrase “termination with cause” might be more accurate since the employer has grounds to fire someone who isn’t performing up to expectations or meeting specific criteria in their contract.
However, they have this right under work-at-will laws present in some form across all 50 states unless moving forward would violate state or federal employment law.
How Does a Physician Provide Notice?
There will be a Notice Section in every physician employment contract. This section will detail how one can give notice: personal delivery, certified mail, email, fax, etc. The physician must provide written notice of intent to terminate the agreement. Verbal notice is not sufficient.
Considerations With Longer Notice
- Greater than 90 days’ notice
- More time to prepare for a new job (travel, credentialing, etc.)
- Awkward work environment
- Hostility from employer
Considerations With Shorter Notice
- Less than 90 days’ notice
- Less interaction with the employer
- A new employer does not have to wait a long period of time for the physician to start.
- Not enough time to prepare for a new job (tail insurance, credentialing, housing, etc.)
The term of the employment agreement refers to how long the contract lasts. Most physician employment agreements are between 1 to 3 years, with automatic renewal after the initial term ends.
Contract duration clauses are often found in employment contracts to outline how long the contract will last. It is typically done for an indefinite amount of time. Still, if it stated a specific date on when it would end, that could also be included. An example of this is someone hired with no specified term length. And they are then coming back after they have completed their degree or reached some other goal set by both parties.
So that work can resume more easily without starting from scratch whenever something happens outside their control, like graduating college in four years instead of six. You could go part-time while working during your first two years before going full-time once classes stop for summer break.
Termination Without Cause
You would be wise to use a duration clause when defining an agreement’s effective period. It can help you protect your interests should the contract need early termination. It also helps clarify what type of early termination is possible for both parties. And it includes things like whether or not it will end on its own accord, if any specific events trigger an automatic expiration date (such as a breach), and more!
When creating a contract, both parties should know what the terms are. If there is a duration clause in place, it’s common for either party to be able to renew with one another if they desire. And as long as you spell out your conditions within the duration clause, it can also ensure clarity about when their time will expire and how much one must give notice before termination of service takes effect.
Not every contract has a precise end date. However, some usually allow flexibility on behalf of both parties. Who may desire to continue after expiration and wish not to terminate before its conclusion? You could always include these personal clauses in the main document, explaining them clearly, so everyone knows where they stand at all times- including yourself!
For Cause Termination
Companies usually have an employee handbook to outline the standards of behavior expected from their employees. A separate code of conduct may also be in place, outlining specific incidents for termination should they happen within a company or on its premises.
Common causes that lead to immediate dismissal include violence and drug abuse. Still, theft is not uncommon either, as well as sexual harassment, depending upon the severity and number of offenses committed by one individual. The more severe cases typically result in automatic termination with lesser violations, which might require progressive warnings before finally being terminated if it reaches a point where other options are no longer viable.
When the Length Does Matter
The one instance where the initial term of the agreement matters is if the physician must repay a sign-on or relocation bonus if they leave within the initial term of the agreement. The agreement will dictate how much of the sign-on bonus is forgiven based on the physician’s employment length.
- If the initial term is 24 months, 1/24 of the sign-on bonus is forgiven monthly.
- If the initial term is 36 months, each year completed will forgive 1/3 of the sign-on bonus.
- Or if the physician does not meet the initial term, they must repay all the sign-on bonuses.
Set Term With the Employer
But, not all employees enjoy the same protections regarding employment. It is why it’s so essential for individuals negotiating a contract to be fully aware of their options before committing themselves and signing on that dotted line.
For example, an at-will employee can get let go with no notice if they don’t do what their employers want them to. Think back to your favorite show where someone gets fired because she didn’t sell enough lemonade in one day!
Meanwhile, some contracts specify fixed terms, like two years or more. These agreements will detail specific reasons and probation periods (if applicable) for termination without cause should either party fail to uphold certain obligations set forth by this agreement.
When an employee must quit their job, they are obligated to give notice that the relationship is ending. It’s typical for a physician to provide between 60 to 90 days’ notice before terminating employment so both parties can prepare accordingly.
An employment contract is a formal agreement between an employee and employer in which the two agree to work together. Fixed-term contracts are one type, but there are other types for jobs with more fluid timelines, such as hourly wages or commissions based on performance.
Termination | Terminated Without Cause
Employers can terminate employees early in a fixed service contract if the employer provides valid reasoning and proof. However, employers must provide evidence that an employee was not fulfilling their obligations before termination can occur.
For instance: if an employee wasn’t providing services agreed upon by contract but had been given sufficient time for absences due to illness or injury. Then they could cancel it without giving notice; however, if either party provides no reason, this would fall under “constructive dismissal.”
An employee who signs a fixed term of employment has certain rights when considering being dismissed. Based on an agreement with the company during the negotiation stages- one such right relates to whether or not duties were met per the original terms set.
We are a dedicated team of legal professionals specializing in physician contracts at Physician Contract Attorney. With years of experience in the healthcare industry, we deeply understand the challenges faced by physicians when navigating complex employment contracts. Our mission is to ensure that our clients are protected and well-represented. We focus on providing sound legal advice tailored to your unique needs, empowering you to negotiate your contract with confidence. For more information or to schedule a consultation, please reach out to us today.