Physician Contracts During COVID
I have received too many calls concerning physician contracts during COVID. The calls generally have the same underlying issue: “My employer cut my pay by X%, and I do not see anything in my contract that allows them to do that.”
Generally the physician is correct. Although new contracts I am reviewing now often do contain specific provisions allowing the employer to reduce pay, cut hours, etc. in a pandemic, very few physician contracts drafted before the pandemic contain such provisions.
I have reviewed many physician contracts to determine if the employer has the contractual right to cut pay for the physician. Almost inevitably, the contract does not give the employer this right.
Unfortunately, determining the legal rights under physician contracts is frequently of academic interest only. In an ideal world, physician contracts during COVID would not be breached simply because the employer is suffering financial consequences. However, most physicians already realize that this is not an ideal world.
The Golden Rule applies. Attorneys have a slightly different version of the Golden Rule than you may have been taught. For attorneys, the Golden Rule states that “he who has the gold rules.”
The practical effect of the Golden Rule is that the employer (who is holding the “gold” of the physician’s compensation) tends to rule. The employer is holding money that rightfully belongs to the physician. This means that the onus of correcting a contractual breach is on the physician.
The employer doubtless is well aware that it has no contractual right to change the deal already struck in physician contracts during COVID. So pointing out the breach is likely pointless.
In effect, the physician has four choices: suing the employer for breach of contract, terminating the agreement for cause, terminating the agreement without cause, or simply walking away. Let’s look at each of these options.
Suing the employer is an expedient way to get the money that is owed. However, being involved in litigation while the physician is still employed is likely to be extremely unpleasant for all concerned. Few physicians want to engage in litigation at all, especially while they are still working for the adverse party.
For cause termination of a physician employment agreement seems like the obvious approach in this scenario. The employer has breached the agreement, so the physician certainly has cause. Most for cause termination provisions allow for either immediate termination or a very short “cure period” of perhaps 10 days. The obvious problem with this approach is that the physician will be left without income and searching for a new position during very uncertain times. Very few physicians are willing (or able) to enforce their rights this way.
A second option is to terminate the agreement without cause. Without cause termination in physician employment contracts is extremely common. Without cause termination generally has a longer notice period, of perhaps 90 to 120 days. Although this gives the physician more time to seek suitable replacement employment, this also is risky during a pandemic.
Some physicians have been tempted to simply walk out the door. Not giving the notice required under a physician employment agreement, however, is rarely a good idea. In addition to the same downsides as terminating for cause (primarily, immediate loss of income), the physician is now breaching the contract as well, so any chance of getting paid what the physician is owed is greatly diminished. In addition, the physician runs the risk of being sued for damages based on the cost of a locum tenens to replace the physician. The physician’s next employer will want to speak to this employer, and the departing physician can expect to get hammered in that conversation.
So, what to do? Physician contracts during COVID are lose/lose for everyone. The best advice might be to stick around and start looking for another position. Once the physician’s income is secured, she can give notice (with cause or without cause, depending on the physician’s timeframe) and get out. A physician’s contractual rights don’t go away just because that physician is no longer employed there. After leaving, it might make sense to investigate a potential legal action to recoup the money that rightfully belongs to the physician.
To learn more about the critical issues to be aware of when negotiating a physician employment agreement, you can see my podcast of the 3 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.