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Continuing our blog series on the Top 10 Reasons Why Physicians Should Seek Legal Review of Their Employment Agreements…
6. Potential Liability for Events Out of Your Control:
Physician employment contracts often contain provisions that put physician-employees on the hook for potential liability arising from various events and circumstances that are out of the physician’s control. Conversely, employment contracts often exclude language that would indemnify physicians from particular sources of liability. As attorney-agents working on behalf of physicians, our job is to identify those potential sources of liability and amend the applicable contract language so that our physician clients are not held accountable for issues or circumstances that are outside of their control.
One potential source of liability that we regularly work to avoid is damages arising out of billing and collection practices. When a physician works for an employer, whether it is a hospital or private practice, the responsibility to bill and collect for the physician’s services is almost always placed on the employer. This work is typically done by billing staff who use physicians’ provider numbers to enter the information and then bill and collect for the services. In the event that the billing staff makes an error while using a physician’s provider number, the physician may be held accountable, despite the fact that the physician made no errors himself.
Another area that we often see physicians being placed in unfair positions is with regard to termination provisions. Most physician employment agreements contain both “without-cause” termination provisions and “for-cause” termination provisions. Generally, the for-cause provisions indicate that the physician can be immediately terminated if he commits certain acts of wrongdoing, such as being convicted of a crime or losing his license to practice medicine. However, employers sometimes try to include for-cause termination provisions that are completely out of the physician’s control. One example is a provision that reads: Employer shall have the right to immediately terminate the Agreement, without prior notice, in the event of the bankruptcy, receivership, dissolution or merger of the Practice. Provisions like this are troublesome, as it does not seem fair or reasonable to terminate an employee immediately and “for-cause” based on the employer’s insolvency or change in business organization.
7. Understanding the Effect of Termination Provisions:
In the excitement of being offered a job and the hastiness that often causes physicians to hurriedly sign the employment contracts that they are offered, many important contract provisions are merely skimmed over or entirely overlooked. One of the most important aspects of an employment contract is the termination provision, and it is imperative to review that provision closely and have a clear understanding as to your rights and the employer’s rights.
As mentioned prior, employment contracts generally contain both “without-cause” termination provisions and “for-cause” termination provisions. The without-cause provisions allow both the employer and the employee to terminate the employment agreement, for any reason or no reason at all, upon providing the other party with a specified number of days of advance notice. The number of days of notice required is very important. The notice periods we often see range from 60 days to 180 days. If a physician wishes to leave his current employment position, he will have to plan substantially ahead in order to adhere to the notice requirement. The period of notice is also important as it may make the difference between a physician moving seamlessly to another employment position or having a period of unemployment. In the event that an employer desires to terminate a physician’s employment without cause, the physician will have to use that time to job search and secure a different employment position, and so a sufficient amount of time is desirous for the employee in that situation. It is also important to note that if an employer wants to terminate an employee, it will almost always do so via the without cause termination provision. This is because using the for-cause termination rights opens the employer up to challenge and law suits if it is not clear that the employee has committed any violations or wrongdoing. Rather than face the possibility of challenge or backlash, employers prefer to simply utilize the without cause right and make a clean break.
For-cause termination provisions will allow the employer to terminate an employee based on the employee’s commission of various wrongdoings, one of which is often a blanket provision including “any material violation of the employment agreement.” While employees are held accountable to adhere to the employment agreement and avoid any violations of the same, employers are often not held to the same standard. For this reason, it is important that employment agreements always include language that similarly holds the employer responsible for adhering to the agreement. In the event of the employer’s failure to fulfill its duties and obligations under the agreement (i.e. failing to pay the physician in accordance with the applicable compensation provision), the employee should have the right to terminate the agreement for cause.
Finally, when considering a contract’s termination provision, another crucial aspect to consider is how termination will affect your compensation. Will you be paid for services provided up to and through the actual termination date, or will compensation cease upon receiving notice of termination? Especially for physicians being compensated under production models, it is very important to clarify these aspects.
To learn more about these and other key provisions in your physician employment contract, please contact Leigh Ann O'Neill at 317-989-4833 or via email at loneill@lauthoneill.com.
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