How Do You End An Employment Contract (Relationship TERMINATION)
The short answer is, obviously, yes. However, it will be determined based on the terms of the contract. In any employment contract, there will be a section that deals with the times, the employment contract’s length, and then termination, so how that contract ends. Let’s first talk about the terms of the agreement.
Most employment contracts will have a date, meaning it’s a year-long, two-year, or three-year contract. 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 closed in another way after the initial period 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 with no automatic renewal, it would just end at the end of two years, and that would be it. The parties can go their ways.
What Are the Reasons for Contract Termination?
Now, regarding terminating the contract, the first part is that if there is no renewal, it ends, and the employment contract ends. Second, by mutual agreement. Suppose the employer and the employee agree that the relationship isn’t working. In that case, they can always, by contract, decide to move on, and then that’s it, you can move on. Next would be with-cause termination. In this case, if someone breaches the employment contract, there’ll be language that states why the employer can fire the employee. If you need a license to perform the activity and 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, ordinary 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 an employment contract, the most common reason is just payment concerns. Either someone is unpaid, they were promised an amount in the associate employment agreement, or maybe the timing. Also, the bonus payment is involved, and there is disagreement over the professional owed amount. That’s always a big, I guess, 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 an employment 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 associate contract is. Typically, that’s somewhere between 15 to 30 days. And the same can go for an 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 dental associate agreements immediately. The last and most common way in most employment contracts is without-cause termination. There’ll be language that states that either party can terminate the employment 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. Suppose the professional is unhappy and wants to move on. In that case, they give written notice saying I’m utilizing the without-cause termination notice in the employment contract. Then they must work out for 30, 60, or 90 days. Then at the end of that period, they can move on without any concerns regarding terminating the employment contract. Yes, an employee can terminate an employment contract, but they must follow the terms of the agreement.
Employment Contract Termination and Non-Compete Law
Just because an employee terminates, the contract doesn’t mean it necessarily ultimately 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, The employee would have to pay back a prorated portion of that if they left within the initial term of the employment 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. How long will that last if there is a geographic restriction and then some temporary condition? That will continue even if the employee terminates the contract. If some malpractice insurance is involved and tail insurance is needed, it will say who must pay for that in the contract. Employees may also be responsible for that if they terminate the agreement. Although the employee can terminate the employment 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 essential discussions and things employees could negotiate before signing any employment agreement. Hopefully, that was helpful—kind of an overview of termination of an employment contract.
How You Can Terminate an Agreement
You probably shouldn’t, and your employment contract probably prohibits it. In any agreement, it’s going to state how you can terminate an agreement. It could be for-cause, without-cause, mutual termination, or maybe the initial term ends. But in most cases, I mean most contracts are terminated without-cause termination. Without-cause termination, either party can terminate the contract with a certain amount of notice to the other. Typically, around 30 to 90 days is a standard amount for most employment agreements. Suppose you are an employee, and for whatever reason, you don’t want to work for the employer anymore. In that case, you must follow those terms written on the without-cause termination notice.
And it always needs to be written. It’s going to state that you must write a letter. And then, it will also say if it’s a 60-day without-cause termination. The employee has to provide it 60 days prior, work it out, and after the 60 days are over. The employees are free to go once the contract terminates, and the employees are free to move on. They want to go where they want to go after that—considering if there’s a non-compete or a non-solicit. Still, we’re not going to get into that today.
How Do Employees Communicate a Notice?
The most crucial part as far as this goes is that it will be called “notice” or “notices.” It’s toward the back of the employment agreement initially provided by the company. And this will state who, then how you need to provide notice if there is communication.
An employee could provide in writing a certified letter or overnight hand delivery of whatever termination notice you’re going to provide. And that would then be considered adequate notice. Very few contracts allow email as an effective notice medium. If you gave, let’s say, you wrote an email telling your employer. I’m giving you without-cause termination notice, and I have 60 days. X will be my last day of work. I appreciate the opportunity. Well, if the email is not an effective communication medium within that notice section, that’s not considered effective notice. And then, the employer could make you work for another 60 days until you provide adequate notice. So, that’s the essential part. You need to look in the notices section and determine if the proper way to terminate the employment agreement includes email.
I can tell you if I review a hundred employment contracts, 98 of them will not include email or fax. And you certainly can’t just verbally tell your employer you’re leaving. It must be in writing. And most often, it has to be sent either by certified mail or hand-delivered. It depends on whether you work for a small practice or a vast conglomerate with locations in every state. It’ll be impossible to hand-deliver the notice if you must provide notice to the headquarters, and that’s halfway across the country.
The Consequence of Notice Not Received
To be safe for the most part, you need to write a letter. You’ll have to print it out and send it via certified mail that the employer is using. Usually, it’s one or two. You must send it to the owner if it’s a smaller practice. If it’s a big conglomerate, you have to send it to probably your boss plus the legal apartment of the company as well. If you look through, how much notice do I have to provide? And then how do I have to provide effective notice? You’ll be safe.
I have a couple of scenarios, and people have called me after the fact. And they’ll say I sent a letter to my employer’s email. I told them I was going to terminate the employment contract, and they didn’t say anything. I assumed that my contract would end on a specific date. The employer was mad about the employee leaving the company. The employer ticked off that they were leaving. So, what they did was they just sat on it for 45 days. And then, 15 days before the physician thought he was going to leave, they said, you didn’t provide us with effective notice.
Email isn’t an effective form of communication to provide notice. You owe us another 60 days until you give us adequate notice, meaning a written letter sent via certified mail. And so, the physician had already lined up another job, he had a start date in mind, and then he had to return to the new employer. He would say, I apologize; I will have to delay my start date by almost two months. That was a tough pill to swallow for the physician. If you follow the terms of the notice section, then you should be okay.
Other Blogs of Interest
- Can an Employer Just Terminate Your Contract?
- Contract Termination Letter: Can You Write an Email to Terminate a Contract?
- What Should be in a Termination Agreement Letter?
Can an Employee Terminate a Contract at Any Time?
The short answer is probably. However, it’s going to depend upon the language in the contract. There are ways that an employee can terminate an agreement: one, if there’s a fixed term, meaning a one-year, two-year, or three-year contract, and there’s no language that states the employment contract automatically renews, then at the end of that fixed term, if neither party is going to go or decided to sign another arrangement, the contract terminates, both parties can move on. That’s it. That’s one way on the agreement that can end a contract. Two, through mutual agreement. Maybe it’s not working out, and both parties are like, you know what? Let’s move on. You can mutually agree to terminate the agreement. Three, for the cause. In any employment contract, there will be a section called termination. In that section, it’s going to state how both parties can terminate the agreement.
Employee Contract Termination Without Cause
Without-cause termination is going to be. If one party breaches the contract somehow, how can the other party terminate the contract for the breach? And in most of the for-cause termination clauses, it’s going to state if one party believes the other party is in breach, they must give them written notice. And then that party usually has a period to fix the breach. We called that a cure period.
Usually, it would be somewhere between 15 to 30 days. Maybe the employee wasn’t getting paid a bonus that the employer said they would. The employee lets the employer know: you’re in breach of the employment contract, you have 15 days to pay me my bonus, or I can terminate the agreement immediately. The employer can no longer terminate for-cause if the employer does pay the bonus. And then they could go to the last way of ending the contract without-cause.
Termination Notice Period
In every employment contract, this is very important. There should be a without-cause termination. It means either party can legally terminate the agreement at any point, for any reason, with a certain amount of notice to the other party. Usually, that notice period will be between 30 to 90 days. Why is this important? Suppose an employee takes a job and maybe they were lied to by the employer. In that case, if they’re on a production-based compensation from collections, commission, percentage, encounters, and healthcare RVUs, it doesn’t matter.
But suppose an employee agreed to the contract and the employer gives no guaranteed base, daily rate, or guarantees. In that case, the volume is not nearly what they expected it to be or what the employer said it would be. They don’t have a way to get out of a contract without-cause. The workers won’t have an exit in that job for whatever the length of the term is. That’s not something you want. You always want the ability to get out of the employment contract with a certain amount of notice in the scenario where the job isn’t what you expected. Maybe your boss is a terrible manager, or they’re placing you in a territory or location you don’t want to be assigned.
I mean, hopefully, the employee could check on those in advance of signing the employment agreement. Sometimes, they’re not. Sometimes the employer just straight-up lies to the employee and says, oh yes, all these things are going to be there, and they’re not. Without the Without-cause, employees can insulate themselves from being stuck in a terrible situation for a long time without recourse.
Safety When You Need to Terminate an Employment Contract
So, can an employee terminate a contract at any time? If they have without-cause termination, remember that they must work the entire notice period. Like I said before, if it’s 30 days, give notice, work 30 days, and leave. Suppose you were to go before the end of the notice period. In that case, the employer could theoretically have damages and sue you for lost profits, recruiting, or replacement. So, if you have a notice requirement in your employment contract, you want to ensure that you give the proper amount of notice, work it out, and then move on and find a new job.
How to Get Out of a Dental Associate Contract?
How to get out of a dental associate contract? You will sign one of two contracts when you are a dental associate. It’s either a dental employment contractor or an independent contractor agreement. Ultimately, it’s the same way of terminating the dental employment contract agreement. Still, I’m going to talk specifically about dental employment contracts because those are, I’d say, the standard type of dental associate agreement to sign.
Are Contractual Provisions For Length and Termination Present?
When the contract is signed, there will be language in the contract that states its term. So, how long it lasts and then termination means how either party can terminate the agreement. As far as the term is concerned, usually, it will be one of two things. There is a fixed term with automatic renewals. It could be like a one-year term, which automatically renews for one year unless terminated. More often, there have been evergreen contracts where no term is listed.
It just states the contract continues until someone ends it. One is not better than the other. It’s ultimately the same result. After you find out what the term is, go to the section about termination. The ways to terminate a contract are one, by mutual agreement. If both parties feel like it’s not working out, they don’t need or require a certain amount of notice. They just say, alright, this doesn’t work out. We’re both going to wash our hands of this and move on.
With Cause Termination
Two, if there was a fixed term, let’s just say it was one year, and there was no language about automatic renewal. If the one-year term expires and neither party decides to renew, it might terminate the contract. That’s it. Cause-termination is another type of termination. Suppose one party is in breach of contract. In that case, there’ll be language that states the party who thinks that the other party is in breach has to give them written formal notice that says, you’re in breach of contract due to this. And then, typically, there would be a language called a cure period.
And the cure gives the party breaching the contract a period to fix whatever the problems are. Usually, it’s somewhere between 15 to 30 days. In this scenario, let’s say the dental office is not paying a bonus they said they would, or it’s not timely. Whatever the issue, the dental associate would send them a letter saying, “We agreed that you would pay me this amount of bonus, but you haven’t paid this.” You are in breach of contract, you have 15 days to fix the breach, or I have the option of terminating the contract immediately. That’s one way to get out of the contract.
Without Cause Termination
The last and most frequent way is through without-cause termination. Every contract agreement a dental associate sign needs to have without-cause termination. And that means either party can terminate the agreement at any time with a certain amount of notice. Why is this important? I find this, especially in the dental industry. The volume/if compensation tied to collections can be puffed up before the dentist starts. So, they might get into a situation where they’re being paid purely on production. The volume isn’t there, or they’re making nothing. And then they’re stuck in a contract if there’s no without-cause termination language.
So, what you want is somewhere between 30 to 90 days for without-cause termination notice. The way that would work is just like if someone is in breach. The dentist will then state in the written letters that I’m terminating the agreement, per without-cause termination. That is the most typical method of terminating a dental associate agreement. My last day at work will be X date. I must appreciate the opportunity. The same goes for them as well. If maybe they don’t think it’s working out with the dentist, they can give them notice. Then they can make the dentist work out whatever the notice period is, or sometimes they can just tell them, look, go home, or we don’t need you anymore.
However, they still must pay you for that notice period. So, if you had a 30-day notice, the dental office states were terminating the agreement. We don’t want you to come to work tomorrow. They still would have to pay the dentist for those 30 days. Now, the tricky part comes in. If you’re not on base salary, you’re not getting a daily rate, or you’re only getting paid on production. If you’re not productive, you’re not going to get paid. Then there needs to be a discussion before signing the contract and getting language in there. So that the dentist isn’t essentially working for free or not getting paid all for that notice period.
There’s a notice period, at least in the healthcare field, generally for continuity of care. They don’t want a dentist or healthcare provider just not to show up one day and say I’m leaving. And then there’s a bunch of patients on schedules, people who need work done, and there’s no one to provide that. They can put the patients in a tough spot if there’s just no notice and their provider leaves. It is not the dental associate’s problem. However, if they give enough information, these are the patients of the practice, not the dental associate.
And so, when the dental associate terminates the employment agreement, once they leave. They have no obligations as far as the patients go or worry about referring them or transitioning somebody else. That’s the employer’s problem. So, to get out of a contract, the term can end. You can mutually agree to terminate it, terminate it for-cause termination. If the other party doesn’t fix a breach or give without-cause termination in a letter, finish your time and move on.
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. Whether the professional must pay the penalty or be penalized depends upon the agreement’s language. 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 that the professional must think about 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.
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 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 notice can be given: personal delivery, via 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. This is typically done for an indefinite amount of time. Still, if there was a specific date stated on when it would end, that could also be included. An example of this might include 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 involved. 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. This can also prevent confusion about when their time will expire and how much notice must be given before termination of service takes effect.
Not every contract has a precise end date. However, those 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 into 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. For instance:
- If the initial term is 24 months, 1/24 of the sign-on bonus is forgiven each month.
- 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 complete the initial term, they must repay all the sign-on bonuses.
Set Term With the Employer
But, not all employees enjoy the same protections when it comes to employment. This 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 from 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
In a fixed service contract, employees can be terminated early 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 there is no reason provided by either party, 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.
Employment Contract Questions?
Contract Review, Termination Issues and more!