Can You Break a Veterinarian Contract? | Veterinary Contracts

Can a veterinarian break their employment contract? And the short answer is yes. They can. However, if this means they’re breaching the contract and not adhering to the contract terms. Then they would likely open themselves up to liability, including litigation costs and arbitration. The employer can ask for damages, including recruitment costs for a new veterinarian for the practice. They may ask for administrative and credentialing fees, and the list goes on. So, it’s never a good idea. We never advise our clients to breach their contract. The best way to break or terminate the contract is by doing it exactly how it’s outlined. Typically, there is a termination clause, and there are three ways to terminate a veterinarian contract.

The first way is that both parties, the employer and employee, mutually agree to terminate the contract and go their separate ways. However, this is rare, and we don’t see it happen often. The second way is for-cause termination. And this is typically weighted more towards the employer. The employer can terminate the contract without notice if any egregious acts happen. Typically, you can find it on the contract. This might be being convicted of a felony and losing your license to practice. And again, the list goes on from there. Then the last way to terminate a contract would be for no cause. No-cause termination outlines typically in the employment agreement. It would help if you gave the other party 60 to 90 days’ notice, and then the contract terminates. You can go your separate ways.

Achieving Smooth Contract Termination

The contract also typically outlines how to provide that proper notice. It normally has an address, and you would either mail in a letter or hand-deliver it. In some rare instances, you’re allowed to send it through email. We also like to encourage our clients to provide notice in multiple ways. That is the proper way to save yourself from liability to terminate a contract properly. But when you decide to do this or break a contract, you also want to keep in mind, are there any repercussions? Do you have to pay back any signing bonuses or relocation expenses? Typically, those have a payback provision or a forgiveness period. And if you are to break or terminate the contract within that time, you must repay those. So, you want to look at that in your contract. Keep that in mind whenever you decide to break or terminate the contract.

And then lastly, most veterinary employment contracts have a provision with restrictive covenants. Restrictive covenants include your non-compete clause and non-solicit to clients and employees. In the non-compete clause, you want to ensure you’re not practicing within the restricted area or during your restricted time. Typically, you’re not allowed to solicit clients, so you can’t ask them or entice them to come with you, and the same for employees at your clinic or practice. In summary, you never want to breach a contract. If you would like out of it, you need to terminate it properly and provide proper notice. And then you also need to remember, are there any repercussions to look for? Sort anything you’ll need to pay back. Like signing or relocation bonuses, look at those restrictive covenants to ensure you’re not violating them.

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Can You Break a Veterinary Associate Contract?: Associate Veterinary Employment Agreement Termination 

Can someone break a veterinary associate contract? The short answer is yes, you can. However, breaking the employment agreement or employment contract means you are not adhering to the terms you signed and agreed to. You could be in breach of the contract. And if you’re in breach, there are some severe consequences that you need to consider. First, sometimes contracts will have liquidated damage clauses. If you break this agreement, leave before you complete your term, and you do not provide proper notice without-cause termination. There may be financial consequences equating to tens of thousands of dollars. You want to ensure that you read your employment agreement and fully understand what you’re signing. That is because you can’t just walk away without consequences.

The Restrictive Covenants

The other terms you want to consider are any of those restrictive covenants. So, that’s your non-compete clause, your non-solicitation of employees. Those all still stand, so even if you break the terms of the agreement. You can be liable for violating the non-compete clause or the non-solicitation clause. So, you want to ensure that you read your employment agreement and understand that those restrictive covenants don’t disappear. Even if you breach the agreement, they can come after you for damages, breach of the contract, and a violation of the restrictive covenants. 

Now, most veterinary employment agreements will have an arbitration clause. That means you’ll have to sit down with an arbitrator to discuss the damages of this breach. If they don’t have that, your employer can sue you in court and bring any damages. And what’s that going to look like? Suppose they must recruit another veterinarian. The price of that and onboarding that veterinarian, if they’ve lost any business while you are gone. Can get serious for someone very specialized. There are a few of you out there that can fill that position.

So, the short answer is yes. You can always break a contract. But what are the consequences of that going to be? You will probably be in breach of the contract, which can either mean arbitration or litigation. You don’t get out of the restrictive covenants; those things stick around. You will have to abide by the non-compete and the non-solicitation clauses. Sometimes there’s also confidentiality there. 

Without-Cause Termination

And then, lastly, it’s best to look at your contract itself. Sometimes, well, most of the time, you should look for it and should not sign a contract that does not have a without-cause termination. If there’s a without-cause termination, you provide the required notice, anywhere between 60 to 90 days. That’s typically an industry standard that you’ll be terminating the agreement. Then at the end of that 60 to 90 days, you walk away.

Veterinary Employment Notice

However, the restrictive covenants are always going to apply. Still, you’re not opening yourself up to arbitration or litigation costs because you did it properly. The other thing you want to remember if you’re terminating the agreement without-cause is to provide the proper notice so that 60 to 90 days start. There’s normally always a notice clause in your employment agreement contract. However, they’re vastly different. Sometimes you’re able to provide your notice in person via email. However, sometimes they have to be in writing and mailed to headquarters if it’s more like a corporate setting, but they’re always different. And if you mail them, sometimes the notice starts on the first day and the third day after you mail it in. Again, you want to read this carefully to ensure you’re not in breach of your contract.

What Should Be in a Veterinary Associate Termination Letter?: Termination Letter for a Veterinary Practice

What needs to be in a termination letter for a veterinarian employed at a veterinary practice? The short answer is that it needs to be direct and doesn’t need to include too much. To start, though, first, you need to know if you can terminate your contract if it has to be for-cause or without-cause, and you’re going to start with your employment agreement. There’s typically, or there should be, and you should always look for this before you sign an employment agreement without-cause termination. And what that means is you can have a cause, or you can have no cause at all. And you don’t have to disclose that when you terminate your employment with the veterinary practice. Typically, a notice provision states that you must provide the employer anywhere from 60 to 90 days’ notice. A notice that you will be ending your employment agreement.

There’s also going to be a clause in your employment agreement that usually states how to provide proper notice. So, where are you going to be turning that termination letter into? Is it a person? Do you have to mail it, hand-deliver it, or email it? Every contract should have a notice clause. However, they’re all vastly different. 

Ways of Turning in a Termination Letter

So again, read that employment agreement telling you how to write that letter. And the consequences towards the payment of compensation after the contract is terminated. Now, most of the time, I would say that it has to be in writing. Sometimes you can email it. Sometimes you can hand deliver it. You also want to be careful if it states that you have to mail your termination letter. Usually, there’s an address to send it, and sometimes there’s more than one address. So, you want to be careful. Also, it will explain to you if your notice starts the day you mail your letter or if you have to count anywhere from one to three days before your notice starts.

This is important. It will help if you read this before you write your termination letter. That is because the termination letter should state that you terminate your employment. Provide you proper notice, and your last day will be, and then you can fill that in. If you want to thank them for all of their support and opportunities, you can. But only what’s required is that it’s in writing that you’re notifying them that you’ll terminate this agreement. It’s also helpful sometimes if you want to let them know that you will assist them with transitioning to a new veterinarian. Still, all events are different, depending on your relationship with them.

Is There a Letter Template for Termination?

If you’re ending in bad circumstances, maybe the most direct route is the best route. You do want to ensure that you are giving proper notice for the full time. Sometimes we have clients call who need to provide a shorter notice than the requirement under the employment agreement. It can be a little stressful because you could technically be in breach of your contract. So, if you ever need to provide a shorter notice than you’ve agreed to provide, you may want to consult an attorney or our office. We can also assist with that. So again, to reiterate, if you’re terminating the employment agreement. It should get done how it’s written in the contract. And typically, it’s in writing. You need to state that you are terminating your employment, giving notice and that your last day will be.

How to Get Out of a Veterinary Associate Contract? | Employment Contracts

How can veterinarian associates get out of contract terms? So, you’re working for an employer, you’re unhappy with the terms, and you want to leave. How do you get out of the contract? Your employment contract should contain four ways of terminating the contract. 

Four Ways of Terminating a Contract

If there’s a fixed term, it’s a set amount of time. No language states it automatically renews for successive terms. Let’s say it’s two years, you finish those two years, it doesn’t renew, the contract terminates, and you can move on. That’s the first way.

The second way is mutual agreement. At any point, either party can say this isn’t working. Let’s wash our hands of this relationship and move on. That does not happen very often, but that’s another way. 

The third way would be with-cause. If one party is in breach of contract, the other party can provide them with written notice. And then, usually, they’d have a short period to fix whatever the alleged breach is. That’s usually somewhere between 15 to 30 days. And at the end of that period, if they did fix the breach, they couldn’t terminate the contract immediately. Suppose the vet has bonus productivity calculated quarterly, the employer either refuses to pay or has been slow to pay. The veterinarian provides them with a written notice. And then they have 15 days to fix it. If they don’t fix it within those 15 days, then the vet can terminate the contract immediately at their option.

And then the last and most common way to terminate a contract is without-cause termination. Without-cause termination means either party can terminate the agreement at any time. For any reason, with a certain amount of notice to the other party. For most vets, it’s somewhere between 30 to 90 days. And that’s just the most common way. Probably 9 out of 10 contracts are terminated if you’re a vet. 

Repercussions of Terminating Contract Terms

There are plenty of ways to get out of a contract. Now, what are the repercussions if you do end up leaving and terminating the agreement? Well, as I said before, many contracts for the initial term. Let’s say you have an initial two-year term. Receive a signing bonus, relocation assistance, probably licensure, malpractice insurance, or some benefits. There may be language in the contract that states that if you leave within that initial term. You must pay back a portion of that signing bonus or relocation assistance, or you’re not eligible for productivity bonuses.

So, investigate the language of your contract and see, if I terminate the contract early, what are the repercussions? What do I have to pay? What do I have to pay back to them, or what am I losing out on compensation? Many veterinary services clinics use the ProSal method. In that model, they pay you for your production. And so, you need to be very careful if you terminate the agreement. There’s language in the contract that states you will be compensated for any services you’ve rendered that have no collection yet. In veterinary medicine, you don’t have, at least generally don’t have kind of the same log time as a physician would have where maybe they do services.

And the vast majority wouldn’t be paid out for 60 to 90 days. Based on the cash nature of veterinary medicine, the percentage of the outstanding collection is much less than in other specialties. However, you still don’t want to miss out on that. I’d say veterinary services insurance for individuals is becoming more popular. And so, the average count’s receivable cycle is between 30 to 90 days.

Outstanding Net Collection on Contract Termination

Think about this: if you earn productivity on just what your net-collections are, and then you terminate the agreement. And you have a bunch of net-collections outstanding, and the contract states you’ll only get paid up to the date the contract terminates. Well, you work for free for a month or two, so nobody wants to do that.

Know About Veterinary Services Compensation

Suppose you decide to terminate the terms in the agreement. Make sure that before you sign the contract, it states that you’ll be paid any of the collection services for anything you did while you’re there. That is even after you terminate the contract. Having to get out of a contract is honestly just a kind of standard part of doing business.

With all these enormous conglomerates gobbling up the vet-owned practices, I’d say there’s a lot of unease and unhappiness for many veterinarians. And they may be in a practice that they’ve loved for ten years, and then the corporation sweeps in, buys it out, and things change immediately. And then they have to decide, am I going to sign this new contract? Am I going to terminate the old one to leave?

There’s just a lot of turnover in that field right now. And figuring out the most effective way of getting out of your contract is very beneficial. Hopefully, that helps and gives you the little basics on how to get out of an employment agreement.

How Is a Veterinarian Given a Draw in a Contract?: Production in Veterinary Contracts

What is a draw in a veterinary associate employment contract? A draw is related to compensation. It means how much money you will make each month in some way. Let’s talk about the different compensation models and when a draw would come into play. Usually, the vet would have a guaranteed base for at least the first year or two of their contract. It’s doubtful that you would come into a new employment opportunity and have straight productivity. In the veterinary arena, its calculation is almost through net-collections. Net-collections are any money the practice receives for the vet’s personally performed services.

Whatever they collect, that’s what would be considered net-collections for that vet. And one common way of doing it is, let’s say you have a one-year guarantee, and the reason why they do that is it takes time to build up a practice. Now, I guess it depends upon what specialty you’re in, but for the most part, let’s say you’re a general vet. You’re not just going to hop into practice and have an immediate client base. It takes a while to build up. So, they’ll provide you with a guaranteed base in year one. Then after year one, they’ll probably switch you to the productivity/net-collections model. And that’s when a draw would come into play. The veterinary services industry utilizes the pro-Sal method commonly. And it’s a methodology for a veterinary practice to pay their employees, allowing them at least a small profit margin.

Pro-Sal Method

And in that method, they will take a projection of what your net-collections would be. And the vet would then receive a smaller percentage of that per month. And then there would be a reconciliation or true up at the end of the year. Let’s go through some examples. Let’s say the vet makes 120,000 per year in their first guaranteed base year. And then they collected that price as well. 

While under pro-Sal, they would maybe knock it back to 80%. You would make 10,000 in that scenario per month. And so, they would say, alright, what will knock it back to 80%? And then the vet will get a draw of $8,000 per month. And throughout the year, they’ll make 8,000 per month. And then, at the end of the year, they’ll take whatever the total net-collections for that vet versus what was paid out.

In that scenario, 8,000 times 12 minus 6,000. And then if there is a difference, meaning, if they collected more, they would then get a percentage of those net-collections. The downside is if you are in a negative balance, meaning, if you collected less than they paid out, they would generally make you pay that back over time. And what they’ll typically do is they’ll take however much you’re in the deficit for. Let’s say it’s $6,000. Over the next three pay periods, they might take 2000 out of your paycheck until you’re back to zero. Is that fair? It just depends. No one wants to employ any employee that doesn’t cover their salary and expenses. If the vet is completely unproductive, they can expect a termination letter.

Veterinary Contract Production Compensation

Now, if there are some underlying reasons why a veterinary service provider is not as productive, this is big in the veterinary industry due to lack of staffing. If you can’t get the veterinary techs, you can’t get the front office staff. If they can’t have any efficient workflow and the vet is doing everything they didn’t have to do before. That will slow them down, and their collections will decrease. As a side note, you must ensure the language in your employment agreement. That states the veterinary services practice will provide you with proper support to make your practice efficient. Back to the draw, it could change over time. Let’s say you had a 120 base, then you moved into a decreased percentage per month as your draw. But then you collected 160,000.

Well, they would probably bump up your draw to 120,000 and then do another reconciliation at the end of a year. There are many different ways to calculate compensation in a veterinary services associate contract, but that’s probably the most common way regarding productivity. I also find that many veterinary services are just paid on a straight basis from year one to year five. And that makes it simple, to be honest.

Consequences of Breaking an Employment Contract | Breaching Contracts

What are the consequences of breaking an employment contract? The first issue is what is considered breaking a contract. Some think that just exercising their right to terminate the professional agreement breaks the contract. I don’t think of it that way. You don’t provide proper notice when I think of breaking a contract. You leave the job without following the terms of the professional 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 professional 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 high price 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 professional 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 the Terms?

If you believe the employer is in breach of contract terms, 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 provide 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 provide 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.

Ensuring Safety When Breaking Contract Terms

To protect yourself, read the contract terms, see how the contract can be terminated either for-cause or without-cause termination, and follow the requirements. Suppose you must provide 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 provide 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 provide effective notice, It is not considered a proper termination. It 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 provide 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.