Breach of Employment Contract (Examples You Can Be SUED For)

What are some examples of breaches of employment contracts? First, you need to think that any employment contract will have a termination section. And then, that section will state the reasons for the contract to be terminated. There are four common reasons. If it’s just for a set amount of time and doesn’t automatically renew, say a one-year contract ends, neither party renews it, and the contract can terminate that way. It can be terminated by mutual agreement. It can generally terminate without-cause, meaning either party can terminate the agreement for any reason at any time with a certain amount of notice to the other. And then lastly, and this is what we’re going to talk about, a contract can be terminated for-cause. If someone is terminated for-cause, it means that one of the parties has breached the contract and failed to fix the breach.

Cure Period for an Employment Agreement Breach

If a party is in breach of contract, the contract will likely state that you must provide written notice to the other party that they’re in breach. And then, normally, there would be a cure period. Somewhere between 15 to 30 days is standard. Let’s say you’re an employee, and the contract states you will be given a quarterly bonus.

You earn the bonus based upon whatever the language is in the contract, and then the employer doesn’t pay it out either in time or at all. Well, you could write them a letter stating you’re in breach of contract. You were required to do this; you didn’t do it. And then they have the cure period so they can fix the breach. Let’s say it’s 15 days here. Then they would have 15 days to fix the breach of contract and pay the bonus. The employee’s right to terminate the agreement immediately for-cause if they don’t. 

Examples of an Employee Breach of Employment Agreement

Breach of contract can go both ways. The employer can breach the contract, and then the employee can breach the contract as well. If you’re an employee, the things you can do to breach the contract are plentiful and are usually spelled out specifically in the agreement. Let’s say you’re a healthcare provider, you lose your medical license and DEA registration, you’re uninsurable, and you, most of the time, get a felony.

Things that can prevent, let’s say it’s a physician, from completing the task that they have to do. In that scenario, it’s usually an automatic and immediate cause for termination. If you can’t practice as a doctor, you can’t fill the terms of an employment contract. Those are some examples of breaches. 

Others could be that maybe you’re scheduled to take a certain number of calls, and you refuse to do it. Or you’re only coming into the office half the time scheduled, or you refuse to work in some specific locations agreed to in the contract. Those are reasons that an employer could fire employees. 

How Can an Employer Breach a Contract?

Now, what are some things that the employer can do to breach the contract? As I said, if they’re just not paying compensation on time, or maybe they’re not doing it correctly. I guess staffing has been a big issue recently, kind of inability to properly staff. So, in the contract, it will state the employer will provide proper equipment, office space, and staffing. 

For instance, I know the veterinarian industry is really a hard hit. And so, if there aren’t enough vet techs, front office staff, the veterinarian can’t be efficient in their time where they’re doing duties that they shouldn’t have to do. That could be why the employer is in breach of contract by just not providing enough administrative support, which would allow the professional to do their job effectively. Especially if the professional is on some productivity compensation, inadequate staffing or administrative support can directly affect how much the professional will make because they can’t be as productive, and they’re not generating as much net-collections. Therefore they’re just not going to make enough. 

So, those are the common examples of an employment contract breach. A ton more could happen, but I think those are the most common.

Other Blogs of Interest

• Remedies for Breach of a Physician Contract
• What is Considered a Breach of a Physician’s Contract?
• How Employment Contracts can be Terminated

Consequences of Breaking an Employment Agreement

What are the consequences of breaking an employment contract? The first issue is what is considered breaking a contract. Some think just exercising their right to terminate the agreement breaks the contract. I don’t think of it that way. You don’t give proper notice when I think of breaking a contract. You simply leave the job without following the terms of the agreement. In that scenario, what are the potential consequences? Let’s say professionals at a job are not working out for whatever reason. In almost any employment contract, there will be a section discussing how to terminate the contract. And then, within that section, there’ll be what’s called without-cause termination. Without-cause termination means either party can terminate the agreement at any time with a certain amount of notice to the other party, generally between 30 to 90 days.

Breach of Notice Period Agreement Might Cause Legal Damages

Let’s say the professional walks in on Monday and says, I’m leaving tomorrow. Still, they had a 60-day without-cause termination notice requirement. Well, if that does happen, the employer could then potentially go after. When I say go after, I mean legally go after them, sue them for breach of contract. And when you sue somebody for breach of contract, it can involve several damages. There could be lost profits for what they would’ve expected that employee to generate during those 60 days. They could also go after the replacement value. They could go after the employee if they had to find a costly short-term replacement. There could be damages for recruitment fees in trying to find that employee’s replacement. They could maybe go after them to get back a signing bonus, relocation assistance, licensing fees, and credentialing if they’re a healthcare provider.

So, if you break a contract, you walk out and don’t fulfill the terms of the agreement. The professional may be liable for several things. When I’m having a consultation with somebody unhappy, they say, well, these are all the things the employer is not doing right. They’re not paying me my bonus in time, or they’re making me work more than that in the contract, or I have to take twice as many calls as they said I would. Okay, just because they’re doing it or breaking the contract doesn’t mean you can leave and then cite that as a reason. 

What Should You Do If Your Employer Is Breaking a Contract?

If you believe the employer is in breach of contract, you need to provide them with written notice that states you are in breach of contract for these reasons. And then typically, there’d be some language that states you can cure the breach, usually somewhere between 15 to 30 days. And if the employer does fix the problem, then the employee cannot terminate the contract for-cause.

If you can terminate it for-cause, usually, it can be immediate. You give the employer written notice that they’re in breach of contract and if the employer does nothing. It would be the option of the employee to terminate it immediately. That is simply different than the employee just breaking the contract. It would be best if you went through it to protect yourself under the terms of the agreement. And even if the employer is not fulfilling their terms, you still must give them notice. You still must wait for the cure period. Then if they fix whatever the problem was, you still can’t just break the contract and jump immediately to a new position.

How to Ensure Your Safety if You Need to Break an Employment Agreement

To protect yourself, read the contract, see how the contract can be terminated either for-cause or without-cause termination, and follow the requirements. Suppose you must give 60 days’ notice to terminate the agreement without-cause. In that case, you must provide 60 days’ notice, or you can potentially open yourself up for a lawsuit in damages. Lastly, there will be a section in the contract that states how to give effective notice. What I mean by that is it will say to provide proper notice. You must send certified mail, hand delivery, a written letter to the address of the business or the attorney of the firm, or whatever. 

If you don’t give effective notice, It is not considered a proper termination. Means you don’t follow that notice section. And in that scenario, the employer can say, “Well, you owe us another 60 days until you give us effective notice.” So, follow the termination section, and follow the notice requirement. In that way, you can avoid paying anything back to the employer or damages for lost profits, recruitment fees, etc. I went over it at the beginning of the video.

Can an Offer Letter Be Revised After Signing It?

Can an offer letter be revised after signing it? In short, yes, it can. There are infrequent times when an offer letter, also known as a letter of intent, would be binding upon a professional. I mean, it would need to explicitly state that the terms of the offer letter are binding. And usually, in that case, it would be something in academia and much more detailed than just a standard employment contract. I can’t recall a time where an offer letter said it is binding with an employment agreement to follow that would also be binding. And there are several reasons why most employers don’t do that. 

First, from the employee side, receiving an offer letter will break down the basic terms of the employment relationship:

• The compensation, 
• Productivity,
• Bonuses, 
• The length of the term,
• How long the contract lasts, 
• How it can be terminated,
• Some of the benefits, 
• Malpractice insurance, 
• If necessary, the restrictive covenant, 
• Non-compete, 
• Non-solicit 
• Non-disparagement confidentiality

It’s basic terms. An offer letter is usually a page or two at the most. In contrast, an average employment agreement is at least 20 pages and could be longer. It’s just basic terms. Now, if you look at basic terms and say, you know what, that’s an excellent salary. I’m okay with that. And maybe it just says it has a non-compete but doesn’t have the actual terms. And then you agree to sign the offer letter. But then, when you get the employment agreement, you have some context provided. Having some specific language provided could change a contract you thought would be significant to cannot be not so great.

When You’re Uncomfortable With the Terms

And let me give you an example. Let’s say, in the offer letter, it says, yes, there’s non-compete. But it doesn’t have any terms. Then you look at the actual employment agreement. The non-compete lasts for three years and a hundred miles from your primary practice location, sales territory, or whatever. Well, that job where the comp looked great, maybe the benefits look great. Well, if the non-compete will force you to move from your current community, that may be a deal-breaker for some people. Maybe you can go back to them and say, hey, I’d like the terms of this non-compete reduced. It is not what I was expecting. It’s much more restrictive than average. And for me to feel comfortable signing this agreement, we need to change these terms.

Contract Revision Due to Lack of Specificity

The terms may not have been in the offer letter, but you want to get the terms changed before you sign the employment agreement. What if they say no? Let’s say they say, no, we’re not willing to change the terms of the non-compete. Well, you could go back to them and say, I know we already agreed to a base salary. However, if I’m going to accept the terms of this non-compete, it’s not worth what I decided initially.

It’s worth a hundred thousand more for me to agree to this. Although we originally settled on the base salary in the offer letter, I’m not okay with that now. I’m not going to accept that now. And if you want me to sign this employment agreement, we will need to change the compensation structure. That’s fine. They may be upset. They may be irritated. Still, when you do something like that, when you’re coming back at them and renegotiating already negotiated terms listed in an offer letter, you need to provide context and reasoning for why.

Can You Change an Offer Letter After You’ve Already Signed It?

And non-compete is a good example. I didn’t have the terms of what it would be. Now that I see those specific terms, I’m not okay with it. And this is the reason why I want changes to other things. I think any savvy employer is going to understand, okay, well, I mean, that makes sense. Now, they may not be willing to make any changes. And as I said before, they may be slightly upset that you’re coming back at them.

Still, I would never suggest that a professional should ever sign an employment agreement with terms. They’re not willing or comfortable just because they signed an offer letter and agreed to the terms of an offer letter. Unless it says it’s binding, it is not binding. You can still negotiate terms even though you signed the offer letter. And even though you negotiated them initially. It is much better to tick off an employer and maybe reach terms than to accept terms with which you disagree.

If you go into a job and feel your compensation is not correct. Or you are concerned about one of the restrictive covenants. Most people don’t last that long in those positions. You want to feel good going into a new job. If you don’t feel good even if you’ve signed the offer letter, don’t go through with taking on the new job and starting a new position.

Go through with taking on the new job and starting a new position.

Everything You Need to Know About Medical Employment Agreements

Before starting a new job as a physician, it is important to sign an employment contract. Such a contract not only states your duties but it sets clear guidelines on what you and your employer should expect from each other.  

While you and your employer can communicate the grounds of operation through emails, phone calls, or texts, a written contract will legally protect and cover your rights in situations such as contract termination or unfair employee benefits coverage, among others.  

In this article, we’ll cover: 

• What is a medical employment contract? 
• Who needs a medical employment contract? 
• What to look out for in a medical employment contract 
• How to navigate an employment contract 
• What are medical employment contract pros  

What Is a Medical Employment Agreement? 

A medical employment contract is a written agreement between you (the physician) and your employer. The contract entails what is expected from you during (at times before and after) your working time with your employer. It also details what you should look forward to from your employer. 

The contract highlights things such as the type of medicine being practiced, the number of working hours, your availability, your duties, compensation, arbitration clauses, and benefits. 

It is important to read and understand your medical employment contract before signing it. You should never dismiss something in the contract and think “that won’t be enforced,” as that may be a good recipe for disappointment later on. Having an employment contract lawyer or a practice management consultant familiar with medicine employment law is advisable to review your contract before agreeing to it.  

Who Needs a Medical Employment Contract? 

Anyone interacting directly with patients to provide medical assistance needs to sign a medical employment contract prior to starting the job. These can be new employees, full-time employees, part-time employees, independent contractors, or Locum tenens physicians. Therefore, the following healthcare workers, among others, should sign medical employment contracts: 

• Nurse Practitioners 
• Licensed Practical Nurses 
• Physician Assistants 
• Internists  
• Nurse Anesthetists (CRNAs) 
• Registered Nurses 
• Optometrists 
• Psychiatrists 
• Nursing students  
• Pediatricians 
• Obstetricians
• J-1 Physicians  

What to Look Out For in a Medical Employment Contract? 

Medical employment agreements can seem complex and difficult to understand due to legal terminology and considerations. However, it is important to understand the contract no matter what. This is especially true if your hiring contractor has stayed for a long period without hiring.  

For example, a physician– let’s call her Dr. Lisa- learned the hard way after accepting her first job through a “handshake agreement.” “I was focused on the medicine I would practice and didn’t know the right questions to ask. I worked without a contract for seven months. I didn’t get paid until I’d been there six weeks, and I never had any health benefits,” she said.  

Some of the crucial things you should look out for include: 

Term and Termination 

You need to take note of the start and end date to know the term length of the contract. Also, check any conditions that need to be satisfied before the start date. This can be things such as obtaining licensure in the practicing state. 

An employment contract can be terminated or voided if conditions are not met by the starting date. It can also be terminated due to malpractice, incomplete restriction, and issues tied down to compensation, among other things. Be sure to read and understand every reason your employer may have for the termination of the contract. 

Expiration 

Take note of when the contract will expire. Sometimes the expiration date can be forgotten or left out. Such cases can cause a lot of pressure due to job security. Therefore, if the contract doesn’t renew automatically before the end of the term, remember to renew it manually before the expiration date.  

Non-competes 

Non-competes hinder you from practicing within a specified geographical area after your contract has been terminated. Usually, the radius can be within 2-50 miles, depending on your place of employment (rural or urban area).  

It is always important to negotiate a larger radius, say 50 to 100 miles, especially if you’ll be working in a densely populated area. 

What Are the Pros of Medical Employment Contracts

Apart from a clear established relationship between the employer and an employee, an employment contract creates other benefits such as: 

Clear Compensation Model 

Your employment contract should detail your total compensation. This includes your basic salary and any incentives and bonuses. The model can either be salary with a minimum wage guarantee, salary plus bonuses, or equal Shares Compensation. 

Employee Benefits 

Once you sign the contract, you will be eligible for several employee benefits. These benefits may include the following: 

• Paid time off 
• Health insurance coverage 
• Life insurance 
• Medical malpractice insurance 
• Liability insurance 
• Continuing Medical Education reimbursement 
• Retirement plans 

Relocation Expenses 

In case you need to relocate before starting your new job and your employer has agreed to help you move, you should include those expenses in your employment agreement. According to Meritt Hawkins, healthcare practitioners offered a relocation bonus were offered an average of $10,533. 

How to Navigate an Employment Contract 

Here are 6 summarized steps to help you fully understand and navigate your medical employment contract: 

1. Understand common contract terms such as Indemnification, return of records, Intellectual Property, etc.  
2. Comprehend the provided compensation model 
3. Discern fair benefits and compensation packages 
4. Understand the legal consequences that come with signing a contract 
5. Understand working conditions, liability, and restrictive agreements in your contract 
6. Determine if there are elements of an independent contractor agreement

Note that you don’t have to accept everything that is offered, nor should you negotiate every part of the contract. Study the contract and decide which points are most important to you, be firm on those points and a bit flexible on the less critical points.  

Conclusion 

Starting a new job with a favorable contract can place you in a suitable work environment where your job security, finances, and practice are well protected. The first step to ensure this happens is understanding the contract fully and negotiating where needed. To make the process much more convenient, you should consider having an experienced and knowledgeable attorney by your side. Contact Chelle Law for assistance if you need help with a physician contract review. He will help you every step of the way!

Can an Employee Terminate an Employment Contract?

The short answer is obviously yes. However, it will be dictated based on the terms in the contract. In any employment contract, there will be a section that deals with the terms, I mean, the contract’s length and then termination, so how that contract ends. Let’s first talk about the term of the contract.

Most contracts will have a date, meaning it’s a year-long, two or three years. Then if the agreement doesn’t terminate, it will state a language. It will automatically renew for successive one-year terms. In that case, if a contract isn’t terminated in another way after the initial term ends, it’ll just continue forever until terminated.

I would say there is a rarely fixed term with no language about automatic termination. If it’s just a two-year fixed term, no automatic renewal, it would just end at the end of two years, and that would be it. The parties can go their own way. 

What Are the Reasons for Contract Termination?

Now, regarding terminating the contract, the first part is just if there is no renewal, it ends, and the contract terminates. Second, by mutual agreement. Suppose the employer and the employee agree the relationship isn’t working. In that case, they can always, by agreement, decide to move on, and then that’s it, you can move on. Next would be for cause termination. In this case, if someone breached the contract, there’ll be language that states all the reasons why the employer can fire the employee. If you need a license to perform the activity and you lose your license, or if insurance is required and you’re uninsurable, there are, I guess, vague behavioral clauses. 

If you’re disabled, you die, I mean, standard things, but there should also be a part called a cure. And so, in that case, if one of the parties believes the other party is in breach of contract, the most common is just payment concerns. Either someone is unpaid, they were promised an amount in the contract, or maybe the timing. Also, the payment or a bonus is involved, and disagreement over the professional owed amount. That’s always a big, I guess, the reason why there would be an allegation of breach of contract. 

What Happens if Breach of Contract Is Committed 

If you believe the employer breached the contract, you’d have to provide them with written notice. And then the cure period means the employer would have a period to fix whatever the breach of contract is. Typically, that’s somewhere between 15 to 30 days. And the same can go for the employee. 

If the employer thinks the employee is in breach of contract, they give them written notice, and then the employee has 15 to 30 days to fix the breach. If the breach is unfixed, the other party still believes the other party is in breach. Usually, that party has the option to terminate the agreement immediately. In most employment contracts, the last and most common way is without cause termination. There’ll be language that states that either party can terminate the agreement at any time, for any reason, with a certain amount of notice to the other party.

Typically, it would be somewhere between 30 to 90 days. In that scenario, if the professional is unhappy they want to move on, they give written notice saying, I’m utilizing the without cause termination notice in the contract. Then they must work out 30, 60, or 90 days, and then at the end of that period, they can move on without any concerns regarding terminating the contract. Yes, an employee can terminate an employment contract, but they must follow the terms of the agreement. 

Employment Contract Termination and Non-Compete Laws

Just because an employee terminates the contract doesn’t mean it necessarily completely ends at that point. They could be required of the employee if they terminate the contract. Many times, if given a signing bonus or relocation assistance is provided. The employee would have to pay back a prorated portion of that if they left within the initial term of the agreement. Others could have non-compete associated with it.

So, just because an employee terminates the contract doesn’t mean that the non-compete doesn’t apply. It does, or at least it does in most circumstances if you’re in a state where non-competes are enforceable. If there is geographic restriction and then some temporary restriction, how long it lasts, that will continue even if the employee terminates the contract. If some malpractice insurance is involved and tail insurance is needed, that will say in the contract who must pay for that. Employees may also be responsible for that if they terminate the agreement. Although the employee has options to terminate the agreement, it doesn’t mean that there aren’t at least some strings attached. 

One of the highest priority things I look at in the contract when I’m going over it with a professional. How do you get out of the agreement? And then what do you have to do if it ends within a certain period? In that way, the employee can know that I need to set aside this amount of money if I must pay for tail insurance or if I must pay back the signing bonus. So, they’re important discussions and things employees could negotiate before signing any employment agreement. Hopefully, that was helpful, kind of a little overview of termination of an employment contract. 

Is There a Penalty for Early Termination of an Employment Contract?

Is there a penalty for terminating a contract early in an employment contract? The answer depends on what you consider a sentence and how the professional can terminate the contract. In all contracts, there needs to be termination language, meaning how the professional can terminate the employment agreement. And it’s usually one of four ways. If there’s a fixed term, so let’s say it’s a one-year contract, there’s no language about automatic renewal. After the term ends, the contract terminates, and the parties can move on. Two, mutual agreement, if the relationship isn’t working out and both parties are okay moving on, they can mutually agree to terminate and move on.

Employment Contract Early Termination For Cause

You can terminate for-cause. If one party is in breach, give them written notice, and then they have a certain period to fix whatever the breach is. And then lastly, without-cause termination is the most standard way of terminating a contract. It simply means either party can terminate the agreement at any time with a certain amount of notice to the other. It depends upon the industry, but anywhere from 30 to 90 days is standard. The agreement’s language depends on whether the professional must pay the penalty or be penalized. Let’s say the professional also received a signing bonus or relocation assistance. They’re moving from out of state or to a different city. Most of the time, there will be language in the contract that if the professional leaves before a certain period, they’ll have to pay back a portion of the bonus.

Minimum Term Employment Penalty Clause

Let’s take a $20,000 signing bonus as an example, and let’s say it’s a two-year contract. The professional receives the $20,000 signing bonus. The contract may state that it usually would be monthly forgiveness for the first two years of the agreement. So, every month that the professional works, 1/24 of that 20,000 are forgiven. If they stay for two years, they don’t have to pay anything back for the signing bonus. They only lasted a year and are left in that scenario. Well, they owe half of the signing bonus back. So, they’d have to pay back the employer $10,000. And that would, I guess, be considered by most people to be a penalty. 

Same for the relocation assistance. The same thing would apply if they reimbursed the professional for the costs associated with the move. Usually, it will stick to the initial term length, and they’d have to pay back a portion. Some places do monthly, some do quarterly, and some do yearly forgiveness. It’s better for the professional if it’s monthly forgiveness. Because if you think of it this way, let’s say the professional leaves in month 11. It’s yearly forgiveness, well, they spent almost the entire year there, but they left before the year ended. Now they must pay back half of the scenarios spoken about earlier. Whereas if it’s monthly, you will get 11 of the 12 months forgiven.

And so, you wouldn’t have to repay as much. Some contracts will have a penalty or liquidated damages if the professional leaves within a certain period. They’ll ask for recoupment of recruiting fees in healthcare credentialing, privileging, any money they’ve spent on licensing, and DEA registration.

What if the Professional Leaves Before the Contract Expires?

They may say in the contract that if the professional leaves in the first year, they must pay us back and reimburse us for everything we spent. I wouldn’t say I like that kind of language in a contract. I understand that the signing bonus and relocation assistance should be reasonable forgiveness. Still, for recruitment fees, that’s just kind of the cost of doing business in my mind. So, that could be another penalty. Rarely would I see a contract with a fixed number, meaning if the professional leaves within a certain period, they simply must pay back 20,000 or 50,000 or whatever the number is. That is in some contracts. I wouldn’t say I like that language either. I don’t think that’s fair. But these are all things the professional must consider and absolutely must negotiate before signing the employment agreement.

Legal Consequences of Improper Early Termination

Everything looks great for everyone who enters a new job with the intention of it being a tremendous opportunity. All the people are great to work with when you get there. It’s terrible, or if you’re based upon collections, commission, or whatever, the work isn’t there. You’re not making nearly as much as they said you would or expected. In that scenario, you want the option to terminate the agreement and move on. And if a bunch of penalties is associated with that, it could be a problem.

Another thing to think about is if someone has a bunch of penalties in their contract for leaving. Let’s say in the first year, usually to me, that’s a red flag that they’ve had difficulty holding on to people. This means they’re probably a lousy employer or treat their employees poorly or for whatever reason. But if there’s a bunch of penalties in the contract for leaving within the first year or two, that usually means they’re either bad businesspeople or treat their employees poorly. So, something to think about as well. Those are how professionals can be penalized if they leave before the term ends. Really must think about, alright, if this goes bad, what will I owe after the contract ends? And then you must determine if it’s worth even pursuing the opportunity or not.