Leaving a job is never an easy decision, whether it is made voluntarily or not. A physician terminating a relationship with an employer may face emotionally charged conversations, difficult financial considerations, and long-term legal consequences. As you plan your exit strategy, it is critical for you to be aware of these issues and address them proactively with your employer. This can minimize hard feelings and surprises down the road for you, your former employer, and your colleagues.
In today’s competitive climate, a physician might work for several employers during the length of his or her career. With the tighter financial medical market and pressures from managed care mounting, employers are less likely to tolerate a nonproductive employee. Interoffice or personality conflicts may become intolerable for an unhappy or stressed physician. Physician turnover is a more common occurrence, and if not handled properly, it can be disruptive for all parties involved.
The following steps are meant for physicians contemplating leaving their place of employment or who may be asked to leave in the near future.
Step 1: Consider the Employment Agreement
Ideally, physician-separation matters are addressed preemptively when the physician enters the employer-employee relationship and signs an employment agreement. Thus, before contemplating a move, you should always start by reviewing the terms of your current employment agreement. A well-drafted employment agreement should specify the grounds for termination, both for cause (i.e. a specific set of reasons for immediate termination) and without cause (i.e. either party may terminate voluntarily). The agreement should specify the parties’ rights and obligations following a termination. These rights and obligations likely will vary depending on the basis for termination.
Typically, an employer will provide malpractice insurance for its physicians during the term of employment. However, physicians may be responsible for the cost of “tail coverage” upon the termination of employment. This is designed to protect the departing physician’s professional acts after leaving the employ of an employer with claims-made coverage. Because the coverage can be quite costly, a well-drafted employment agreement often will set forth which party is responsible for the procurement and payment of tail coverage. It is prudent for a departing physician to review the employment agreement to identify who has the affirmative obligation to provide the tail coverage, as it can be a costly surprise at termination.
The employment agreement also must be reviewed to determine the proper method to provide notice of termination (such as first-class mail, overnight courier, or hand delivery). Often, employment agreements will include a clause titled “Notice” that outlines the delivery method for proper notice to the employer.
Step 2: Consider a Termination/Separation Agreement
Entering into a termination agreement (sometimes referred to as a separation agreement) between the departing physician and the employer may address and resolve many of the outstanding issues that are not otherwise addressed in the employment agreement. A termination agreement may avoid unnecessary problems down the road and potentially acrimonious and costly litigation.
The termination agreement can fill in the gaps where the employment agreement is silent (or if an employment agreement does not exist). The key elements of a termination agreement often include:
- The effective date of the separation as well as what exactly is ending (e.g. employment, co-ownership, board membership, medical staff privileges);
- Payment and buyout terms;
- The physician’s removal from any management or administrative position (e.g. member of the governing board);
- Deferred compensation payments or severance pay that may need to be calculated and distributed;
- Employer obligations (if any) to provide the departing physician’s fringe benefits and business expenses, including retirement-plan contributions, health insurance, life insurance, medical dues, etc.; and
- Unused vacation days, bonuses, or expenses due.