Donald Trump turned two words You’re fired! into a cultural sensation. With the economy still in trouble, “You’re fired” has become an all too common reality for professionals throughout the country as employers downsize (or “rightsize”) staff. Medical practices, like any other type of employer, face economic challenges, and unfortunately doctors are not immune to job loss. As a business, physician owners must act appropriately when looking to terminate a physician employee.
Understand the employment contract provisions
There are two basic types of termination provisions: for cause and without cause.
I encourage all of my clients—medical practices and physicians— to be sure they have an executed employment contract in place. A properly drafted employment contract protects the employer and the employee by clearly delineating the respective rights and responsibilities of the parties.
For the employer, the cause termination provisions should be specific in scope while allowing the employer latitude to separate itself from the physician employee. For instance, the for cause provisions could include loss of medical license, loss of DEA (and state equivalent), loss of a participating provider status with a payor, and any other cause for which an employer can typically terminate an employment relationship. This final clause gives the employer sufficient latitude to immediately terminate an employment contract. An employer must exercise discretion when using this provision in order to avoid abuse; a disgruntled ex-employee could bring suit against the former employer for wrongful termination, costing the practice substantial time and legal fees while battling in court or before an arbitrator.
One potential means to help insulate the employer is to include in the physician employment contract a termination provision that permits the practice to terminate the agreement based upon a material breach of a provision stated in the agreement. Often, an employer may consider giving the physician employee a “cure” provision—in other words, a specified period of time—to adequately and appropriately correct the material breach. There are certain things for which a medical practice should not provide a cure provision—for example, a physician employee who is causing harm to a patient or inappropriate competition with an employer. The length of time to cure a material breach should not be excessive, but at the same time provide the employee reasonable opportunity to remedy the breach. Many employers may provide a five- or 10-day cure period from the time the employer provides the employee with notice specifying the material breach. It is quite common to give an employee one opportunity to remedy a breach. If on a subsequent occasion the employer finds the employee in material breach of a similar provision, the employee’s immediate termination is warranted. The contract should reflect that reality.
There may be times when an employer would prefer to avoid a nasty or disputed for cause termination battle and therefore opts to terminate the employment relationship without cause. The timeline for a without cause termination is almost always significantly longer than the period of time in which an employer can terminate an employee for cause. The without cause termination provision typically may be 30-, 60- or 90-days— or potentially longer. Alternatively, an employer may also decide simply not to renew the employment contract, effectively terminating the relationship.
An employee who has been terminated without cause but continues to work on-site for an employer can be a disruptive and threatening force if not managed properly. For that reason, an employer may opt to include a provision in the employment contract that provides for pay and/or benefits for the duration of the notice period while the physician employee stays at home. While this can be an expensive proposition for a small practice, it may also bring peace of mind to the shareholder physicians. It ensures that the departing physician is not stealing competitive or confidential information of the employer or, from a morale standpoint, causing unnecessary angst for the other physicians and staff in the practice.
The employment contract should specify how the employer must provide the termination notice (generally in writing), where to send it, and who (if anyone) to copy on the notice. A failure to follow the proper procedures may delay the effective date of the notice. Even if the delay is only a few days, this likely will increase stress on the practice. Bear in mind that if the departing physician is a shareholder or owner of the practice, the employer may wish to build additional protections and provisions into the various agreements. It is imperative to consider and address these extra terms before the termination can take place.
Topics: Practice Options
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