My name is Robert Chelle with Chelle Law, and my firm assists physicians with employment contract issues. Continuing in my series of casual conversations about specific topics, today we’re going to review, how do you terminate a physician contract without cause. In any physician contract, there’s going to be different ways the contract can be terminated. It can be through mutual agreement, it can be the contract just ends if no one wants to renew it, it can also be for cause. There will be a giant list of things. The employer can fire the physician for cause if you lose your license, DEA registration, you’re uninsurable, have a felony or you’re on the OIG list. Those are all things that are obvious. If you can’t practice medicine, you can’t work for the employer, so they can terminate it for cause the employee meaning the physician should also be able to terminate the agreement for cause.
Without Cause Termination by Physicians
So, if the owner or practice is not holding up their end of the bargain there should be something in there that allow the physician to give notice that the employer’s in breach and usually there would be, what’s called a cure period where either party would have a certain period. Usually, 30 days sometimes less, to fix whatever the problem is. It allows whoever is breaching the contract allows them time to fix the breach. And then lastly, the other way to terminate an agreement, which is what we’re going focus on today, is without cause termination. Without cause is extremely important for several reasons, but on a basic level, the without cause termination allows either party to terminate the agreement with a certain amount of notice to the other, the industry standard would be about 60 or 90 days. Sometimes it’s as low as 30 can be as high as 180, but for the most part 60 or 90 days is kind of the norm in most physician contracts.
Once the physician gives notice that they want to terminate the contract without cause, and let’s just say they have a 60-day notice requirement, then they’ll have to work out those 60 days. And then after the 60 days are done, they can leave. There should be language in there that states if the physician gives notice and the employer doesn’t want them to work anymore the employer can say, I don’t want you to work 60 days. I just want you to go home. However, the employer would then still have to pay the physician for those 60 days.
Physician Employment Contract
The reason without cause termination is important is that no job is perfect. It’s also difficult to kind of gauge through the interview process and going out and meeting the people, seeing the offices, the physician can kind of get a feel of whether there will be a good cultural fit or not, but sometimes it’s a facade. The physician thinks it’s going be a great match and you get there and it’s not. If there wasn’t without cause termination and you just had to work out whatever the initial term was: one year, two year, three years, you’re stuck for that amount of time if it’s not in there and they’re not breaching the contract. So, without cause termination kind of gives the flexibility if situation is not working out and it kind of goes both sides. Sometimes an employer brings a physician in and they’re not a good fit and they want to get rid of the physician.
Some considerations if the physician is going to terminate the agreement without cause. First, usually if you’re with a small physician owned group and you terminate the employment agreement without cause, that physician will be responsible to pay for tail insurance. If you’re an employee of a big hospital or health network, you almost never have to pay for tail. Are there any repayment obligations for the signing bonus relocation assistance? Usually if you leave within the first term, you’ll have to repay some kind of fraction of that. What happens to the compensation after the agreement’s terminated? If a physician is on a pure net collections based agreement and the agreement states when the contract terminates no more compensation goes to the physician.
Employer Practice Agreement Issues
You just lost out on 60 to 90 days of, of collections. The physician needs to make certain that there’s some kind of window. If they’re on net collections after the contract terminates where they can continue to get the revenue that they generated. Also, if you terminate the agreement without cause the restrictive covenants will apply. So restrictive competes are things you can’t do after the contract ends. For instance a non-solicitation agreement, non-compete, non-disparagement, those will all apply. If they’re in the contract and you’re in state that doesn’t prohibit them if you terminate the agreement without cause. Another thing to think about is how to notify the employer correctly. Unfortunately, I see this every once in a while, where a physician will give notice, but it wasn’t effective notice, meaning there will be a section in the contract that says, this is how you give us proper notice.
In that case you must follow the notice provision in contracts. For instance, it may have to be either certified mail or hand delivery, or rarely would they accept an email, but in some cases, they may so really look at the notification section, it’ll have to be in writing and sent correctly. If that happens, if it’s notified correctly, there won’t be any issues. However, I have had a couple cases where a physician didn’t give effective notice and the employer was mad because the physician is leaving, they just sit on it for a month. And then finally came back to the physician and said, hey, you realize you didn’t give effective. Now you owe us another 60 days, which completely screws up whatever new job they have lined up.
Physician Employment Contracts Attorney
If you have a contract that does not have without cause termination (and really the only exception would be if you’re a J-1 where some states prohibit having without cause termination during the three-year term) and it just states that you have to finish the term, that is in an enormous for red flag! You should either have that looked at or move on to a new job that has proper termination.