Employers who want to terminate physician employees (who have a contract) usually see two scenarios: terminate without cause, or terminate for cause. Because of complications associated with each of those options, many employers (and employees) prefer another way out.
First of all, having a written contract is nearly always in everyone’s best interest. They describe duties, expectations and responsibilities. And they contain protective devices like noncompete, non solicitation and confidentiality provisions.
Terminating an employee with cause is nearly always difficult. Has there been documented wrongdoing? Usually not in physician practices. Has there been a written review, signed by the employed physician, which identifies areas of weakness? Not usually in physician practices. Physician practices normally don’t follow the procedures that HR experts and labor labors would advise. Additionally, terminating someone for cause tend to expose an employer to claims for breach of contract (if the contract doesn’t precisely describe the applicable reason for termination) and wrongful or retaliatory termination, both of which (1) jeopardize the enforceability of noncompetition covenants and (2) usually result in both the employer and employee marinating in expensive litigation. Moreover, for cause termination may create a “black mark” on the professional history of the terminated employee. Terminating for cause is usually the last resort, and then only if the path has been well paved beforehand.
Terminating someone without cause is usually far more preferable, but it’s not perfect either. Though without cause termination usually removes the employer’s risk of wrongful termination or breach of contract, it normally requires the employee to hang around for even several months. Most employers (and employees) just want to move on once it is clear the relationship is broken, but the remedies available in an employment agreement are often imprecise and inadequate.
“Plan B” is simply a new deal made by the parties, which isn’t described in the employment agreement. Essentially, the parties sit together and the employer presents two scenarios: “Given where we are at, I can terminate you immediately for cause, which leaves you having been terminated or we can find a way to end our relationship on a softer note.” That usually involves:
1. The employee resigning (rather than having been terminated);
2. Agreeing on a termination date;
3. Payment of some amount of compensation (up to a month or more); and
4. Both parties signing a termination and release agreement.
As far as the release goes, there are things that can be released, and things that cannot be released. For instance, an employer and employee can be safe from civil litigation in such a document, but neither can be safe, for instance from violations of law. There is not effective way for an employer to be protected from the possibility that the employee may file a complaint with OIG, the Board of Medicine and others that there has been a violation of law. That said, the release can cover many of the usual liabilities, even claims for unemployment compensation.
Plan B is usually preferred by both employers and employees. It provides both a dignified way out and allows both parties to move on with far less damage than usual.