What is an at-will employment contract for a physician? At-will employment generally means that either party can terminate the agreement at any time, without any notice for any reason. Most people think of it as an at-will employment arrangement like most nurses, and I’ll use healthcare as an example. So, techs, nurses, and administrative staff they’re not on employment agreements. They’ll just become an employee. And then, at any point, if the employer doesn’t want to employ them anymore, they terminate and let them go. And there’s nothing the employee can do about it. An employee could potentially have a claim for wrongful termination, retaliation, or something like that.
Provide Notice Even If It’s an At-Will Contract
But for the most part, at-will means you can eliminate them at your will. Most physician contracts are considered at-will as well with the caveat. In almost any physician contract, there will be a notice requirement, and it’s done for a couple of reasons. For the most part, there will be what’s called without-cause termination in an agreement. It will state, at any point, either party can give a certain amount of notice to the other. And terminate the agreement for any reason. And so, that would be the at-will part of it. It’s an at-will but with the short notice required. For most contracts, it’s usually 60 to 90 days.
Let’s have a scenario where physicians are unhappy. They got a better opportunity, and they want to leave. They must provide a written notice to the employer. It might say, per the agreement, I’m giving you 60 days’ notice that I intend to terminate the contract. My last date of employment will be this, and that’s it. Now, there can be some things attached to terminating a contract that every physician needs to consider. The whole reason behind putting at least some notice. One, so the employer can attempt to find a replacement for the physician. Two, if the employer terminates the physician without-cause. There, that physician will still get paid for whatever that notice period. Even if the employer doesn’t want the physician working with them anymore.
Continuity of care is also something that a physician needs to think about. Let’s say, a physician is in psychiatry and they have a very vulnerable patient population in the hospital. Then medications are involved with every patient. If the employer fires the physician without a replacement or plan in place to transition the patients to a new provider. Or to provide bridge scripts or any of that, that’s a patient care problem. So, having that little notice period allows both the physician and the employer to put steps in place to ensure there’s at least a continuity of care plan to transition patients. Either to a new provider that already employed the employer. Or ship them out to another physician.
Still, Consider The Repercussions
Some of the things that a physician needs to think about. Even if you terminate the contract without-cause, even if you’re at-will, you say, I’m not interested in being here anymore. There are still some things that can follow you. One, the non-compete, the non-solicit, will follow you, whether you’re terminated or terminate the contract without-cause. Many contracts will state that if the employer terminates the physician without-cause, the restrictive covenants won’t apply.
Restrictive covenants are non-compete and non-solicit. That’s one thing you want to get added if it’s not in your contract. Another thing to think about could be repayment and obligations for bonuses. Most contracts will state that suppose the physician receives a signing bonus, relocation assistance, or maybe student loan assistance. And they don’t stay for the initial term, which could be two to three years. They’d have to pay back some prorated amount of the bonuses.
And then insurance. The physician may have to pay tail if it’s a claims-made policy. There are many things to think about when a physician terminates a contract. And just because it’s an at-will doesn’t mean there won’t be some negative percussions after the contract terminates. It would help if you always thought about the without-cause termination. How much will I have to pay back in bonuses? What restrictive covenants will follow me, and do I have to pay for insurance?
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What is Without Cause Termination in a Physician Contract?
What is without-cause termination in a physician contract? Essentially, it allows either party to terminate the contract agreement at any time. For any reason, with a certain amount of notice to the other party. Without-cause termination is essential because if a physician enters a job, everyone expects a position to be great, right? You don’t take a job hoping you want to leave immediately, but things change, or it certainly can be different once you start.
Let’s say a physician takes a job. After a few months, it’s clear that it’s not a good cultural fit, or maybe they’re on productivity compensation. Whatever the reason, they’ve decided. I do not want to stay here. And so, without-cause termination will allow that physician to give notice, work out a period, and then move on.
Average Length of Without Cause Termination Notice
The average length, or at least the standard for most without-cause termination notice periods, is somewhere between 60 to 90 days. Anything higher than 90 days causes a couple of problems. Anytime somebody gives notice, the dynamics will change between the physician and the other physicians or the organization itself. You’re no longer in the long-term plans. Sometimes, there can be insufficient blood as well. And so a shorter period to have to work out whatever is advantageous. It’s just better. If you had a 180-day notice, you’re there for six months dealing with a potentially awkward environment.
Another thing to consider is the longer the lead time, the harder it is to find a new job. If you’re coming out of training, everyone comes out at the same time. So, every employer understands this. And there’s a rhythm to when they offer jobs and start onboarding and all that type. If you’re out, you’ve been out for a while. And then you decide to switch, it can be at any time, but most people don’t post for jobs six months in advance. They will say, we have a need now. If you have a six-month notice requirement for your job, you may lose out on job opportunities because they need someone much faster than six months. And so, they’re going to find somebody and leave you in the dust.
Two main reasons: don’t put yourself in a toxic environment for an extended period. And then two, help shorten it down so that you can find a new job as a physician more efficiently. In the physician contract, it’s going to state how much notice you must give to the hospital or employers.
How Much Notice Time Do You Need to Terminate an Agreement?
And let’s say it’s 60 days. This example will also state that it must be in writing. So, you need to find in the physician contract that it’ll be under the termination section. And it will say without-cause termination, for no good reason, or something like that. And then it’ll just state that either party can terminate the contract agreement with a certain amount of notice to the other, as I said before, in 60 days.
There’s another section in your physician contract called either notice or notice. And it will state exactly how you can provide notice to the employer. It’ll say whether it needs to be certified mail or hand delivery. Most physician contracts don’t have email. Indeed, there’s no verbal acknowledgment, no fax. If you were to tell your boss, hey, I’m leaving in 90 days, but not give them a written letter that states you’re going. As a result, they could potentially force you to work for another 60 days until you give them adequate notice. So, those two sections.
Look into the without-cause termination section to see how long or how much notice you must give. And then, look in the notices section and ensure that you can provide adequate notice. I’ve had a couple of times where physicians have called me after the fact and said I emailed my boss. It was 60 days’ notice; they waited 45 days and then came back and told me I didn’t provide them effective notice. And now, they’re saying I must give them another 60 days. Well, it’s vindictive on the part of the employer. They were mad and did that just to kind of screw with the physician.
Not Giving Proper Notice, One of The Legal Mistakes Physicians Make
But if you don’t give adequate notice to the employer, it doesn’t count. Ensure you’re both offering the right message and following the notice section. Now, what happens if you decide to leave a job and don’t give the proper amount of notice? Well, a physician contract will have penalties associated with that. For instance, a common way of doing it would be for the employer to penalize the physician. They didn’t give enough notice of whatever their average daily rate was for every day. If it was 60 days and they only gave 30 days, they’d owe 30 days of their average pay to the employer. Average pay could be a significant amount of money. That’s one of the mistakes physicians make in terminating their employment.
You want to ensure that you give as much notice to your employer as required in that without-cause section. Therefore, you can’t be penalized. An employer could come after you for recruitment costs, locums to cover your shifts, or if you’re an outpatient. Something like that. It’d be rare for them to do that. However, you are opening yourself up to liability if you fail to give them the specified amount of notice in your physician contract.
What to Know Before Signing Your First Physician Employment Contract
What should you know before you sign your first physician employment contract? This question is a broad topic, but we’re going to hit the main areas, things to think about before signing your first employment agreement.
Ways to Determine if Compensations Offered Are of Fair Market Value
First, determine whether the compensation the employer offers you is fair market value. There are a couple of, I guess, good ways of going about trying to find that. The MGMA, the medical group management association, collects annual salary data from across the country. If you can access that, they have a lot of good information about total compensation, average net-collections, and average RVUs generated by specialty. It’s hard to get that info sometimes.
If you Google around, you might be able to find some compensation data that’s a couple of years old. Or you can talk to someone who has access to the data. Like for our firm. We have access to the data. So, we can tell the physician exactly what the numbers say. Now, that’s certainly not the be-all-end-all. There are other services out there that offer something similar. But I also think it’s limited because some specialties have a tiny sample size. In addition, just total compensation should not be the determining factor when looking for a job. Alright, so that’s compensation.
Another way of thinking about it, if you have classmates in your training program, ask them what they’re receiving. It’s going to vary based upon geography and setting. Are they going into a hospital network? Are they going into the federal facility? Or are they going into private practice in some way? It is good to speak to people you train with to see what they’re being offered. Lastly, mentors are another excellent place. If someone is already out and maybe they’ve been a teacher for you or a mentor. Ask them if they’re willing to talk about the type of compensation they’re receiving as an employee.
How To Terminate Contracts
Next would be how to terminate the agreement. Something an employee needs to consider. There are four ways to terminate a contract if the initial term ends. Let’s say you have a two-year contract, and no language states it automatically renews. It just ends, and the contract terminates. You can complete a contract by mutual agreement. Then you can also terminate a contract with-cause. So if one of the parties breaches the contract, either party can terminate the contract. That is, if the other party doesn’t fix the breach. It’s called a cure. And then lastly, and this is what I want to hit on, is without-cause termination.
Every contract you sign must have without-cause termination in it. There are minimal circumstances where no without-cause termination would be okay. If you’re a J-1 employee, that one would probably benefit you not to have that in there. But without-cause termination means you can terminate the contract at any point, for any reason, with a certain amount of notice to the other party. Physician employment contracts that don’t have without-cause termination, meaning you must work out whatever the initial term is. There’s no way of terminating the contract for any reason. They would have to breach it if you wanted to get out of it.
No-Cause Termination Needed in Physician Employment Contracts
The reason why you need that is, let’s say you start with the job. You’re paid on productivity, and the volume is not there. It’s not your fault as an employee. Or maybe the employer brought you in telling you it was going to be one way, and the call is just excessive. Perhaps it’s just a terrible personality fit. Whatever reason you’re not happy in that job, you need the ability to get out of it if you want. So, it would be best if you had without-cause termination in the contract. Somewhere between 60 to 90 days is standard for physicians.
Legal Mistakes Physicians Make not going through Non-Compete
Alright, next, the non-compete. A non-compete says the physician employee can’t work after the contract terminates for a period within a specific area. For example, most non-competes are one year, sometimes up to two.
And then, a reasonable mileage would be 10 to 15 miles from your primary practice location. Often, the employer will try to tag multiple locations. So, maybe if you worked in three outpatient clinics in a hospital or something. They try to attach it to all four of those, or perhaps the employer has many facilities in the area. You’ve only worked at one of them, and they might try to attach it to all the facilities they own. That’s not fair either. You want to try to get it to one year, 10 to 15 miles from maybe at most two locations. Anything beyond that would be considered unreasonable. There are a few states where it’s entirely unenforceable to have a non-compete. But for the most part, most states allow non-competes for physicians.
Health Care Malpractice Insurance, Do Not Practice-Without It
Lastly, the employer should almost always pay for your underlying annual premium with malpractice insurance. How much they must pay each year to insure you? Depending upon the policy, whether it’s a claims-made or occurrence-based, it will determine if you must pay for tail.
If it’s a claims-made policy, tail insurance is necessary. A good rule of thumb is that tail insurance costs about twice your employee’s annual premium. In some specialties, it can be costly. OB-GYN, some of the higher-level surgical things could have tails that are fifty to a hundred thousand dollars. You want to avoid having to pay for that. So, ensure that there’s a fair split between the employee and employer. Or having the employer pay the total cost of the tail insurance.
There’s also insurance called occurrence-based coverage. And in that scenario, tail insurance is not needed at all. It’s about a third more expensive than claims-made, but you won’t have to pay for tail insurance in that scenario.
Now, you probably need to think about dozens of other things. I would say, in my mind, those are the foremost important. But you have benefits, bonus structure, contract length, and other restrictive covenants with the non-solicitation agreement. Also, non-disparagement, confidentiality, your hours worked, and the call. I mean, employees need to think about a ton of things. So, I would suggest reaching out to someone with experience reviewing contracts. When you’re signing a contract that could be worth a million dollars, at least in my opinion, it would be foolish not to get it looked at by someone who knows what they’re doing.
Physician Contract Questions?
Contract Review, Termination Issues and more!