Physician Employment Separation Agreements

This article reflects my recent experience with “not for cause” separation agreements. Although, for years I have reviewed physician employment contracts, this is a significant new development in my practice. I think it reflects the fact that many physician employment relationships are not working out to the satisfaction of physicians or others.

Physician dissatisfaction with an employment relationship comes in many forms. It usually comes because of low pay, overwork, quality of care or interpersonal problems. Although all employment situations have some inherent problems, dissatisfaction can become intolerable. When it does, legal issues arise that must be resolved. The majority of those legal issues involve terms in the original employment agreement, but there are some important ones not in that document which must be addressed.

When a physician decides to leave his ultimate goal is to depart with his contractual rights intact and without harming his career. A satisfactory Employment Separation Agreement is absolutely necessary to achieve that aim. As a starter, I recommend that the Agreement be titled “Separation Agreement” rather than “Employment Termination Agreement” because I want to emphasize mutuality and to minimize the negative impact of the word “termination” on prospective future employers.

I have found that a satisfactory Employment Separation Agreement must contain at least nine material terms. First and foremost, it must comply with the notice requirements of the Employment Agreement. It must contain a firm employment termination date as well as a date when all contracts with ancillary persons such as nurse practitioners and physician assistants shall end. If the separation involves departing from a medical group, the agreement must address a procedure to notify patients.

Issues that are not commonly considered, but are extremely important to include, are a mutual release, a non disparagement clause, an agreement as to responsibility for the malpractice tail, a waiver of the restrictive covenant, if any, and a provision regarding vested retirement benefits. We always attempt to negotiate an “eligible to rehire” term in the non disparagement clause.

Finally, it is vital to conduct amicable negotiation with the Employer’s attorneys. Often, the desire to separate is mutual, making the process easy. Sometimes it is not. If the departure is contested, the separating employee may have some leverage in achieving satisfactory terms. The most common form of leverage is the employer’s short term need for her services. If quality issues are in the background, it is important to document that they are not material. I recommend a clause stating that no investigation is pending and that the physician is in good standing.


Health Care Employment Lawyer

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