For cause termination of a physician employment agreement
For cause termination of a physician employment agreement is obviously a delicate issue. Employers have a legitimate desire to make sure they can terminate a physician’s employment agreement if the physician turns out to be a lousy physician, or if patient demand just doesn’t justify paying the physician any longer.
A physician employment agreement should provide reasonable protection to both the physician and the employer if either party fails to live up to the bargain. That’s the whole reason for having for cause termination of a physician employment agreement. However, too often for cause termination of a physician employment agreement is based on nebulous language that allows an employer to terminate “for cause” even though the physician has done nothing wrong.
For example, for cause termination of a physician employment agreement can sometimes be based upon an employer’s “determination” of a breach. I always try to require such determination to be a reasonable determination made in good faith.
Although you can see the employer’s point in providing for cause termination of a physician employment agreement if a physician is accused of a crime (would you want to send your kid to a pediatrician who is accused of child abuse?), sometimes I am able to convince the employer that only an actual conviction will suffice as grounds of “for cause” termination.
Another common ground of for cause termination of a physician employment agreement is loss or suspension of medical staff privileges. Although that’s reasonable if you are tossed off the medical staff after a due process hearing, these provisions should provide that a temporary suspension for administrative reasons (such as untimely charting) is not grounds for termination of the agreement.
The agreement should also provide reasonable ﬂexibility for both parties to get out of the deal, even if the other party didn’t do anything wrong – or “without cause” termination of physician employment agreements.
In legal jargon, the phrase for cause termination of a physician employment agreement means the other party breached the agreement. A party can terminate the agreement for cause if the other party didn’t do what it was supposed to do, or did something it wasn’t supposed to do. It;s important that the grounds of a for cause termination of a physician employment agreement are clear, unambiguous, and reasonable.
Of course parties can also use “without cause” (or “not for cause”) terminations, even though the other side didn’t do anything wrong.
To learn more about the critical issues to be aware of when negotiating a physician employment agreement, you can see my podcast of the 4 most common traps in physician employment agreements, my physician employment agreement checklist or, for the most extensive discussion of the topic, my book on physician employment agreements. For specific information on topics you might be interested in, see my posts about physician productivity compensation, MGMA compensation analysis, medical record provisions in physician employment agreements, letters of intent in physician contracts, physician covenants not to compete, and call coverage requirements.