Over the years, our Georgia-based physician employment agreement law firm has helped physicians and medical practices with thousands of physician employment agreements. In most instances, it cannot be known at the front end of the parties’ contractual relationship whether there will be any dispute about any contract provision or otherwise how a particular provision may come into play. But one thing is always definite:
The relationship will end at some point. An essential aspect of any physician employment agreement is its duration. For medical practice employers and physician employees alike, it is crucial to understand the full ramifications of the termination section of the employment agreement.
Georgia Healthcare Attorneys
Most every physician employment agreement will have a section addressing the conclusion of the employment relationship, referred to in these contracts as “termination.” The termination section of the employment agreement will typically anticipate three scenarios: 1) termination “without cause”; 2) termination “for cause”; and 3) immediate termination. These scenarios may seem predictable, but they are not inconsequential for reasons summarized below:
Termination Without Cause
Every physician employment agreement should have a termination “without cause” provision that is available to both parties. “Without cause” simply means what it implies, i.e., there is no requirement for reason or justification to conclude the relationship. Rather, assuming required written notice is provided, the agreement can be terminated as a matter of right. The standard approach is a provision that either party can conclude the employment relationship at any time so long as at least X-days’ notice (most often we see 90 days) is provided by the terminating party. We sometimes see notice provisions that require up to 180 days advance notice. Some employers will want a provision that allows them (the employer) to provide less notice than the employed physician must provide. In any event, most employers desire and will require the right to terminate an employed physician without cause.
Most employers will also include in their physician employment agreement a right for the employed physician to terminate the agreement without cause. On the other hand, some employers may not include in their proposed form of physician employment agreement a right of the employed physician to terminate without cause. While every employment opportunity is unique, physicians should be cautious about signing an employment agreement that does not provide a clear pathway to conclude the employment relationship without cause based on a reasonable notice period. In most instances, it is advisable to include in any physician employment agreement a specific provision for either side to terminate the relationship without cause based on agreed advance written notice.
Termination With Cause
Termination “with cause” is a crucial aspect of any physician employment agreement for several reasons. These provisions are typically designed to benefit the employer only. A “cause” provision allows the employer to (depending on the specific wording) terminate an employed physician with very short or no advance written notice. What constitutes “cause” should be specified in the employment agreement. This aspect of the agreement is crucial for both parties because of potentially wide-reaching ramifications of its use. For the employer, the proper exercise of this clause can allow the practice to immediately escape a bad employment relationship that harms the employer’s practice or business. For the employed doctor, not only does the use of this clause mean the employment will end but it also can harm the physician professionally for years to come.
Therefore, for both parties, there are advantages to ensuring that “cause” to terminate is properly and narrowly defined with terms that are as objective as possible. If “cause” includes “a felony conviction,” that is more objective and narrow than “any violation of a company policy,” or similar catchall language with a subjective application. The broader and more subjective the “cause” definition, the more important it is that the language be followed by some “cure” provision, i.e., a provision that explains that cause to terminate exists only if the employed physician fails to cure the violation after receiving written notice of the violation from the employer.
Some employment agreements will indicate that the employed physician can terminate “for cause.” Usually, such provisions indicate that the physician can for cause if the employer breaches a material term of the agreement and the employer fails to cure the breach within a specified number of days (often 15 or 30) after the employed doctor gives the employer written notice of the breach.
Termination Immediately
Many physician employment agreements will include a third category, providing for immediate and automatic termination of the agreement under certain limited circumstances (which may, alternatively, be included in the “for cause” termination section. Typically, these circumstances are severe and objective, such as: death, loss of licensure, ineligibility for professional liability insurance, exclusion from Medicare, or loss of hospital privileges.
Other Sections of the Agreement Affected by Termination
For either party to the agreement, contemplating the conclusion of the agreement warrants consideration of how the manner in which the agreement is terminated affects other aspects of the agreement. For example, the restrictive covenants section may indicate that the employer waives the non-compete if the employer terminates the agreement without cause during a specified initial time frame or if the employed physician terminates for cause. Another important example concerns tail insurance coverage. Some employment agreements will tie the obligation to pay for tail insurance to the manner in which the agreement is terminated. So, the agreement may provide that if the agreement is terminated for cause by the employed physician or by the medical practice without cause, the practice must pay for the tail insurance premium; and that, if the agreement is terminated for cause by the medical practice or by doctor without cause, the doctor must pay for the tail insurance premium. There are many other potential ways for the specific means of termination to affect the parties’ contractual rights. When considering termination of the physician employment agreement, it is important to carefully review the entire contract and the ramifications of the termination method.
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Whether for a medical practice or a physician, we are glad to consult with you about your physician employment agreement. To schedule a confidential consultation with one of our experienced health law attorneys, please contact us at info@littlehealthlaw.com, or call us at our Atlanta office at (404) 685-1662 or our Augusta office at (706) 722-7886.