Physician Contracts: Termination Provisions

Pros and Cons of Without Cause Termination Provisions

Go into physician contract negotiations with a healthy perspective on the “without cause” termination provision and protect your practice with counsel from attorneys who specialize in physician contract review and negotiation.

Most employers have physician employment agreements (physician contracts) drafted with a provision in them that allow “without cause” termination. This means that employees can be fired or leave at any time for any reason.

The following is a short introduction to this provision.

In addition to the “any time–any reason” feature, the “without cause” provision normally requires a certain amount of notice so that both parties have sufficient time to plan for the transition. Sometimes the notice period can be as short as 30 days and in other cases as long as 90 days or more. Physician contracts that do not have a notice period can be problematic because they do not provide both parties adequate time to prepare for financial setback, unemployment or a vacant position. The upside is that a physician employee can walk away as soon as they want to or an employer can find a replacement at any time.

How concerned should a doctor be about signing a physician contract that has a “without cause” termination provision? Let’s look at the followig scenario.

When a physician employee is performing well, adding value and plays an integral role in the practice, the likelihood of the “without cause” provision being triggered is very low because the practice is not going to want to lose him/her and find a replacement. Only when there is a specific problem with the employee would an employer be tempted to use it.

When this provision is in the physician contract it also provides some protection to the physician employee because it spells out how they can leave when they decide the employer is no longer the right fit or they find a better opportunity elsewhere. Out of respect for the employer, it is better for the employer to be aware of the upcoming change rather than being surprised by it.

This type of termination provision is good for employers because it helps them prepare for transition. It is also good for employees because it gives them the ability to leave. The downside of the provision is that employers cannot remove employees at will and employees cannot leave without serving some additional time, unless they are willing to submit to various financial obligations.

Now that we’ve discussed pros and cons of the “without cause” termination provision, what can physician employees do to make sure the provision is fair? Unless there are other factors that sweeten the deal, it is not recommended to sign off on a notice period that is more than 90 days. Why? When either party is ready to make a change, they are going to want to do it as soon as possible and not have to wait for more than three months. Sometimes it is difficult to find a new employer or to find a qualified replacement so it is understandable to have a certain amount of required time to prepare for the transition. If either party is considering the change, it is clearly in the interest of both sides to take an inventory of their options before providing the notice.

Termination provisions are a critical part of physician contracts and it is crucial that the agreement between physician employers and physician employees be mutually agreeable. This is an area of physician contracts that is negotiable and with the proper guidance, physician employees, independent contractors or potential partners can make sure the language that governs termination is fair and reasonable. Physicians can prevent problems down the road by heading them off at the beginning of the relationship with the first contract.

To get access to an attorney who is a physician contract expert, let us know. We can introduce you to independent law firms who have provided counsel for all 50 states.

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