While it’s a little bit of a buzzkill for doctors to think about all the ways you may leave a job when you’re excited about your new position, it’s necessary. One of the most important and commonly negotiated items in physician contracts are the terms of separation. You’re going to want to know how much notice either party will have to give, the terms under which your termination can be terminated with cause, terminated without cause, and in each of those scenarios what your rights are in regards to noncompete clauses, who pays for tail insurance if needed, what the buyout terms are if you have bought into to practice partnership, and more. Below, we outline what to pay attention to in the termination section of a physician employment agreement, and discuss how to negotiate the best terms possible for your physician contract.
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What is the termination clause in a physician employment agreement?
In almost every physician contract, there will be a termination clause section that outlines the terms of separation - under what circumstances a physician can be terminated and what happens in each of those circumstances. The termination clause of a physician contract is incredibly important for both the employer and the employee, and will likely be one both feel strongly about protecting their interests in. It needs to protect both parties.
Why does the termination clause matter for physicians?
As the physician, you should make sure that it is not so restrictive or expensive to get out of a contract that it is a barrier to you leaving if you find a job that’s a better fit for you, and that you feel secure that you can make life plans around the job without constant fear of what happens if your employer suddenly no longer wants you around for whatever reason.
Why does the termination clause matter for employers?
The employer will want to be protected from situations such as you leaving suddenly without notice and leaving them without call or case coverage or otherwise short-staffed, against you becoming a competitor to them, and likely wanting to protect themselves against the large costs that they paid upfront to bring you on as an employee and to help build your practice, whether those be signing or relocation bonuses, malpractice insurance, or other expenses.
What are the different types of termination in physician contracts?
While every physician contract is different, generally speaking, there are two ways a physician contract can be terminated, with cause and without cause (on both sides).
Generally speaking, termination with cause means that one of the parties did something wrong to force the other's hand into terminating the contract, whereas termination without cause means that one of the parties decided it was time to move on, and utilized this clause as a way to give a pre-agreed upon amount of notice to the other party. As you may guess, termination with cause is often a much bigger deal, as there is a claim of wrongdoing by one of the parties. This claim has to have a legitimate reason and be backed up by evidence. It is often used carefully in more contentious situations or situations where the terminating party needs to utilize the protections that the termination for cause clauses carry with them. It is very important that the rules of this clause are followed to the letter, as this is where many wrongful termination clauses come into play.
There are more nuances than this, as either party may elect to terminate someone without cause even if they had a reason, in the interest of keeping the peace or preventing future issues for the opposing party, as being terminated with cause often comes with potential consequences and is often looked upon as a red flag by future employers.
Common reasons that employers include in a termination without cause clause are reasons that would preclude the physician from being able to practice in the capacity that they were hired for. These could include things both in and out of the physician’s control, and you should try your hardest as a physician to limit the number of things in this clause that are out of your control. Examples are losing your medical license, violating hospital bylaws or doing something that would cause you to lose hospital privileges, not being able to be credentialed with the employer’s payors because of things like not being board certified or failing your recertification exams, unethical behavior, not meeting certain productivity targets, or doing something in direct violation of your contract (“breach of contract”).
There are many more specific situations that a contract may spell out based on the individual requirements of the employer. Make sure you have a contract attorney review these and make sure that they are fair and standard, and raise any red flags that may be embedded into the wording. As a physician, you are going to want this clause to be as specific as possible, as vague wording may give your employer an opportunity to terminate with cause on a technicality and not give you some of the protections or benefits you’d be offered in a without cause termination.
What things are often included in termination clauses?
There are certain big things that are almost always included in termination clauses, including the noncompete clause and, if applicable, who pays for tail insurance and what happens to bonuses received or owed. If you are a partner in a practice, this will be much more extensive, because it will also outline how your private practice buyin is reversed and how you are bought out of the practice.
If you are terminated with cause, the terms of separation will typically be much more unfriendly to you. Your noncompete clause will almost certainly be enforced, and it is more likely that if you have a claims based malpractice insurance policy, that you will be responsible for paying for your tail insurance. Tail insurance can be very expensive, so it’s a big deal to avoid paying responsible for paying your tail insurance if at all possible.
There will also likely be terms about how much notice has to be given if the contract is terminated without cause, potentially information about who pays certain legal fees or expenses if there are expenses incurred because of a party’s wrongdoing, and conditions about solicitation of the physician’s existing patient panel. Many contracts have non-solicitation clauses, which prevent the physician from recruiting their staff to join them at their next job or trying to take their patients with them.
Many contracts will also have conditions about severance packages or how long an employer will pay benefits if terminated without cause. In order to protect yourself from a last minute whim by the employer, as a physician it is in your best interest to have the longest notice period possible as well as make sure that you have benefits for a while after a without cause termination while you figure out your next steps. In addition to the with or without cause aspect of ending a physician employment agreement, many conditions within these clauses may depend on the length of time that you have been with an employer. For example, they may stipulate gradients for how much of the tail insurance is covered depending on how long a physician has been employed, or how much of a signing or relocation bonus has to be paid back.
Noncompete clauses will likely have many conditions associated with them, enough so that we’ve written about them separately. While these are not always enforceable, you should try and negotiate them down to the best of your ability, as fighting them can be expensive and unpredictable, even when unfair.
Learn more about the noncompete clause in a physician employment contract.
Learn more about the types of malpractice insurance and what to know about tail insurance.
What will an employer include to protect themselves within a termination clause?
Often times, the employer’s concern is related to the noncompete and the expenses above, as discussed. But they’re also concerned about making sure that you leaving suddenly doesn’t disrupt operations, as this can be financially devastating. They will want enough notice to hire your replacement, and they’ll also want to make sure you dot your ‘i’’s and cross your ‘t’s before leaving. They’ll want to make sure they’re not charged with patient abandonment, that your notes, medical records, and billing are completed, and more. Some employers may even try to include clauses that hold you responsible for helping them find your replacement, specifying that some of the money due to you in bonuses may be held to pay locums physicians in the interim or likewise. These can get very nuanced, so again, it’s important for you to have your physician contract attorney fight for you as much as possible.
What happens if nobody terminates a contract, but it’s just not renewed?
This is where it’s helpful to review the separation agreement or terms, often located within or close to the section about the termination clause. This will serve a similar purpose of delineating who is responsible for what costs, what happens to unused PTO, vesting periods for retirement contributions, what happens with the employer’s property, non-disclosure agreements, the noncompete terms or restrictive covenant, obligations in regards to charting and privileges, and notice to patients in an appropriate way so as not to trigger accusations of patient abandonment. While every separation agreement is different, again, you want to make sure that your attorney advocates for the least restrictive burdens on you.
What should you do if you are terminated with or without cause?
This warrants its own article, which we intend to write. However, in the meantime, there are some basic steps you should take. Look at your contract carefully and read through the termination clauses. Make sure you understand your rights. The employer may be counting on you not knowing them and may not offer to pay your tail insurance, drop your noncompete, or pay your benefits for the required amount of time.
If it was a for cause termination, make sure that they have grounds to fire you. If you know you’ve done something to breach your contract or trigger the for cause termination, you may not have any defense, but if you aren’t sure or even if you are sure but are trying to minimize the damage, it’s worth it to talk to an employment attorney who can help you navigate the next steps. In these situations, do not sign anything before talking to your attorney.
Conclusion
The termination clause is a critical portion of every contract that carries with it protection for both parties. Each party is obviously going to advocate for the best situation for themselves here, so you want to make sure that you don’t just accept the default. We guarantee you that these things will matter on the way out, so make sure you talk to your physician contract attorney about any ways to improve the terms for yourself.