Terminating Oregon Physician Contracts

If you have an Oregon physician employment contract (or California physician contract or Montana physician contract - I'm licensed to practice in all three states) and the time has come to move on to another employment opportunity or to owning your own practice, you will need to properly terminate your employment relationship.  The good news is that terminating physican contracts is generally straightforward, particularly if you had a physician contract attorney review your physician employment agreement before you signed it.  You will likely be able to terminate your employment by simply following, to the letter, the no cause termination provisions. 

If you have any questions at all, however, a consultation with an attorney well-versed in physician contracts is a good idea.  I am always happy to help.  Advising physicians on their employment is a signficant part of my law practice.  Please feel free to contact me if you need assistance with termination of your Oregon physican contract.  The best way to reach me is to send an email which includes your telephone number and your employer name (for our conflict of interest check).  I will respond promptly to schedule a time to talk.  I can be reached at:   jimvogele@gmail.com.  You can also give me a call at the number above my biography if you prefer.   

The article below provides basic information on some of the considerations to keep in mind when terminating a physician contract, including a few of the less common issues that require careful consideration before proceeding.  

1.  Standard Physician Contract Termination Provisions

The place to start will be with the "Termination" provision, a common feature in all Oregon physician contracts.  The contract will address the various grounds -- with or without cause -- for termination, and provide timing and notice requirements.  The physician should of course always plan on adhering to the timing and notice provisions, unless a written waiver of compliance is obtained.  

The relatively standard termination provisions will include a host of "for cause" grounds for the employer to terminate the relationship.  Many of these bases allow for immediate termination upon written notice -- e.g., loss of state medical license, prescribing authority, of staff privileges, or conviction of criminal offenses, violation of hospital or medical staff policies or procedures, and so forth.  The contract may also include "for cause" grounds for the physician to terminate without cause, although this generally is limited to the employer's breach of the terms and conditions of the contract.    

Most physician contracts include "without cause" termination provisions, which allow employer or employee to terminate the contract with notice that most typically is 60 to 90 days but may be as short as 30 days or as long as 180 days.  Hiring a physician takes time and, therefore, a fact I encourage physicians to acknowledge when they are considering moving on to a medical partnership or another employment relationship.  As with physician recruitment nationally, recruiting Oregon physicians takes time, including the necessary state medical licensing, board certification if needed, credentialing, panel membership, and other on-boarding activities.  Always plan on providing the requisite notice, and consider providing even more notice where appropriate and possible.      

2.  Restrictive Covenant Issues  

Despite the availability of "without cause" termination provisions, sensitive issues can arise when terminating physician contracts.  These issues often relate to restrictive covenants, i.e. noncompete and nonsolicitation provisions.  Other restrictive covenants, such as confidentiality, non-disclosure and trade secret protections are less frequently the source of contention with employed physicians. 

Any conflicts over restrictive covenant issues -- including interpretation and application -- are best avoided in the first place.  Visiting with an Oregon physician contract attorney when you first receive your contract is the best approach, always.  In addition to providing physician contract review and consultations on a consistent basis, I frequently work with Oregon employees in a wide variety of industries on matters pertaining to interpretation, negotiation, voiding, and enforcement of restrictive covenants.   

 If you have had an Oregon physician contract attorney review your employment agreement, there should be no surprises about your restrictive covenant obligations.  In Oregon, these may include noncompetition, nonsolicitation, and, of course, confidentiality and trade secret restrictions.  HIPAA is ubiquitous in the health care professional setting, so your contract will include provisions about patient data privacy and security; however, your obligations under HIPAA exist regardless of whether you sign a contract referring to HIPAA. 

Most physician contracts in Oregon will have noncompete agreements.  Occasionally, Oregon noncompete agreements are a deal breaker for a physician, depending on the stage of one's career as well as family and other personal and financial considerations.  California physician contracts, which are also a part of my law practice, do not include noncompetition clauses as they are unenforceable under California law.    California Bus. & Prof. Code 16600.  Restrictive covenants in Montana physician contracts are analyzed under a reasonableness standard in order to determine if they may be an unreasonable restraint on trade.  See Mungas v. Great Falls Clinic, LLP, 354 Mont. 50 (2009).   

3.  Employer Material Breach of A Physician Contract

Either party to a physician contract will have the right to terminate a contract in the event of a material breach.  Frequently there will be a right cure the breach, upon written notice, but the right to cure periods in a health care setting are always short, e.g. 15 days or perhaps 30 days, for the obvious reason that material breach of terms and conditions of employment in the health care setting can be a matter of life or death.  

Just as employment breach can be a cause for termination, physician employer breach of material terms of the contract can be a basis for terminating the contract and employment relationship.  Material terms include compensation and benefits, of course, but also the employer's provision of safe and adequate working conditions, treatment space, medical equipment, and support personnel.  An area of disagreement that arises occasionally with respect to physician contracts is the work schedule.  Most Oregon physician contracts will include at least some terms relating to scheduling; but specifics are not always provided.  Nonetheless, the contract will likely include a standard clause to the effect that the employer controls the schedule and flow of work and patients and is allowed discretion in these matters, perhaps in consultation with the physician employee, but the employer will generally retain that discretion.  

Depending on the severity of the breach, compensation or working condition issues can be grounds for immediate termination or other remedial steps or reporting obligations.  Obviously, matters concerning patient safety are paramount and must be addressed, not only as a matter of contract, but also as a regulatory and ethical issue.  

4.  Compensation and Repayment Issues

You will be entitled to compensation during the balance of your employment subsequent to providing notice.  Physician contracts will often include a provision granting the employer the option to end the employment relationship immediately and pay the equivalent of the notice period compensation in lieu of providing notice.

Oregon statutes require require prompt payment of final paychecks.  See ORS 652.140.  There may be times, however, when compensation is based on a fee structure, that full compensation due and owing cannot be determined on the final date of employment.  In those circumstances, the employer will generally be allowed to pay the employee as promptly as practicable and when the amount owing is determined.

Another issue that arises with termination of physician contracts is repayment of pro-rata portions of signing bonuses, relocation reimbursement, student loan assistance, or other incentive compensation.  These earn-out or foregiveness terms are always addressed with specificity in the contract and you should study the terms closely.  Pay attention to the timing of any such repayments, as a relatively short due date may be included, such as within 30 days of employment ending or even immediately.  

5.  Termination Early In The Employment Relationship

If you have recently started a physician employment position and, e.g., determine the position is not the right fit for you, are there laws or principles that prohibit you from resigning in the first few months of employment?  The answer is generally that the contract will control.  Assuming your contract has a no cause termination provision, which allows the physician to give notice, e.g. 90 days notice, of termination for any reason or no reason, then so long as the physician follows the proper notice requirements (notice provided in writing to the recipient specified and by the means specified, sufficiently in advance, and so forth) and you act in good faith throughout the process, there should not be adverse legal consequences -- also keeping in mind repayment obligations, which will kick in with regard to most Oregon physician contracts in that scenario, as mentioned above, i.e. signing bonuses, relocation reimbursement and so forth.  By "good faith," I refer to issues such as communicating honestly with your employer, not misrepresenting your status or plans, not allowing your job search for your future/next position to interfere with your current employment responsibilities, and not violating any of the applicable restrictive covenant provisions or other provisions of your contract.  

This type of scenario, like the next example discussed below, is best addressed in a timely consultation with an experienced employment attorney.  Although extra-contractual issues, such as tort claims, are beyond the scope of this article, one has to be aware of claims such as fraud that in rare circumstances can come into play if a party is induced to enter into a contractual relationship based on intentional, false representations on which the other party relies.  In the employment context, it would be more common for the employer, rather than employee, to be allegedly guilty of fraud in connection with inducing another party to enter into a contractual relationship.       

6.  Termination Before You Ever Begin

On rare occasions, a physician who has accepted an employment position and signed a contract may not be able to start work as planned.  Life plans change and so forth and will sometimes prohibit even the best-intentioned of employees from commencing employment.  In those instances, which I've seen a few times over the years, it is absolutely necessary for you, just as if you are an employed physician, to provide notice and to terminate the contract that has been signed consistently with the contract termination provisions.  Depending on how much advance notice you are able to provide, the employer may or may not theoretically incur financial damages, e.g. recruiting costs to find a replacement physician or even lost business.  The circumstances are unique in each case and, if you should find yourself in this situation, I recommend discussing the issue with an experienced physician contract attorney.  Indeed, I always address this remote possibility, of not actually commending employment, during physician contract reviews.  Upon my recommendation, I have seen a physician, who decided not to relocate permanently for an employment position she had accepted, offer to work for a short period on a locum tenens basis in order to smooth over any conflict; her offer was accepted by the employer and any hard feelings, or damages, were avoided. 

7.  Termination With Trouble Pending

It is important to understand that when an investigation is pending, a hasty resignation is no panacea with respect to, and will not avoid a report to, the National Practitioner's Data Bank or State Licensing Boards.  Federal law imposes a reporting obligation whenever, among other times, any health care entity accepts the surrender of clinical privileges of a physician, "(i) while the physician is under an investigation by the entity relating to possible incompetence or improper professional conduct, or (ii) in return for not conducting such an investigation or proceeding . . . ."  42 U.S.C. Section 11133.

The courts have been called upon to interpret and apply the definition of "investigation,"  See, e.g., Doe v. Leavitt, 552 F.3d 75 (1st Cir. 2009)  The issues surrounding data bank reporting are extremely important to a physician's career, of course, and can be complicated.  Id.

Licensing issues or even malpractice litigation can be an issue for a resigning physician.  You may be working with your employer's malpractice defense attorneys, while at the same time negotiating with different defense attorneys who represent the employer's interests in employment negotiations or litigation surrounding the employment termination.  I have seen it happen.  There is, of course, generally an overlap between employment contract issues and licensing issues and an employment attorney may hand a matter off to an attorney with a focus on licensing law.  I provide referrals to licensing attorneys for most matters involving medical licensing.    

Conclusion

While most often, thankfully, termination of an Oregon physician contract is simply a matter of following the contract termination provisions, in some cases questions will arise about proper procedures, timing, and post-employment effects of the termination.  If you have any questions on these topics or others, please feel free to contact me.  I have signficant experience in the area of physician contracts as well as employment contracts for other health care professionals.