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Terminating An Agreement
Question:
I signed an employment agreement with a group in another state. I am supposed to start with this group next year, but I have changed my mind and want to pursue other opportunities. Can I terminate my Agreement? Can I be sued for breach of contract?
Response:
While the Physician cannot be forced to work for the group, the Physician may be bound by the provisions of the executed employment agreement and may face a breach of contract action in the event the Physician decides not to join the practice.
The first step in answering this question is to review the employment contract to see whether it differentiates between the date it was signed and the date the Physician is to begin providing services for the group. If the Agreement provides for an Effective Date (the date the parties signed the Agreement and it became effective) and a Commencement Date (the date the Physician is to begin providing services), the Agreement is currently in effect and the Physician will have to terminate the Agreement in accordance with its provisions. If the Agreement provides only for an Effective Date that coincides with the date that the Physician is to start providing Services, then the Physician might be able to terminate it now without any repercussions.
If the Agreement is currently in effect, then you should review the Agreement to identify any provisions that address termination of the Agreement. Specifically, the Physician must review the "Term" or "Termination" provision to see whether there are any liquidated damages, refunds of expenses or other express damages provided in the event a party terminates the contract before commencement. These provisions are somewhat rare, but would require the Physician to pay money to the practice. More than likely, the contract will allow the parties to terminate the Agreement "without cause" by providing prior written notice. The Physician should provide this notice if possible (note that some contracts prohibit you from terminating until a certain time (for instance, after commencement of services) has expired.
This means the group will likely try to enforce the non-compete (something that may or may not make a difference to the Physician) and may sue the Physician for breach of contract. While the group probably has a duty to mitigate its damages by finding a replacement physician, it may try to recover any additional costs (or loss of profits and other forms of damages) from the Physician. Even though the Physician may prevail in the end, it can be expensive defending against a lawsuit.
Finally, the Physician should provide notice to the group as soon as possible and, if possible, handle the situation in a very amicable way. This should help to lessen the risk of a law suit and to minimize the damages incurred by the practice.
The preceding was prepared by John Powers, JD, an attorney with the healthcare practice of Husch & Eppenberger. It is prepared as a source of general information concerning recent health law developments and is not legal advice or an opinion. No action should be taken in reliance upon this information without obtaining the advice of a knowledgeable healthcare attorney.
Attorney John Powers has partnered with Cejka Search to address healthcare legal issues in our Legal Counsel feature on cejkasearch.com. His areas of expertise include hospital and medical practice issues, physician recruitment transactions, managed care counseling, development of MSOs, IPAs, and managed care delivery systems, antitrust counseling to healthcare clients, insurance matters, physician-hospital contracting, medical staff matters, and bioethical issues.
If you have a question or comment for Mr. Powers, please send a message to: info@cejkasearch.com