Physician Employment Agreements: Breach of Contract

Cortney Ikpe

As a healthcare contract attorney, I review hundreds of physician employment agreements for medical residents and fellows each year. Most of the physicians I work with are very committed to a practice by the time they are speaking with me about the offer. However, a small percentage, will generally end the conversation with a question similar to this, “what would happen if I take another job after I sign this contract?” The answer is, you may be in breach of contract.

Why is this happening

Why are young, intelligent, physicians signing contracts they do not expect to fulfil? Generally their response is due to a lack of options in the geographic area they really want to live in. Lack of options may seem like an unusual answer given the physician shortage we always hear about, however, the following scenario is the usual fact pattern. A resident wants to practice in New York City (or another popular city). They have been looking at job boards and speaking with recruiters for 6 months and haven’t found anything promising.

As the year continues to go by, they begin to get nervous and sign with an employer that is in a more rural location because it was the closest position they could find to the city. After signing the contract, they continue to look for positions, and occasionally, at the last minute, a position opens up closer to where they want to be. The resident takes the job in New York City, and gets an unexpected answer when they tell the first practice they will not be joining the group, “you’re in breach of contract, and you owe us damages.”

Breach of Contract

How will you know if you are in breach of contract? The answer to that question, like most things in law, is it depends. Some contracts will have a termination without cause section that allows the physician to terminate the contract for any reason, provided they give a certain amount of notice. However, many contracts do not contain this language, or only allow for this type of termination after a year or two of practice.

If you have questions about a contract you have already signed, contact Resolve and talk to a healthcare attorney before making your decision on termination. A practice cannot “force” you to work with them, but the law does allow them to recover monetary damages if you leave.

How much could it cost you?

Breach of contract damages are generally measured as follows. The employer has a right to damages based on the loss in value to the practice of the physician’s lack of performance, plus any other loss, including incidental or consequential loss, caused by the breach.  This would include lost revenue, costs of recruiting another physician, and returning any costs paid for your recruitment. This number could be equal to an entire year’s earnings.

Preventing the problem

Starting your job search early is crucial. That means starting 12-18 months prior to your completion date. Understanding the market for your specialty, and desired location is also extremely important. If you need to be in a highly desirable area, you may need to get help in this process to make your search effective and efficient. Resolve offers tailored practice search services to help in this area.

Finally, do not sign anything until you have had a chance to discuss your physician employment agreement with a seasoned health care attorney. This includes, letters of intent, memorandums of understanding, or any other documentation an employer presents you during the recruitment process. To learn more about Resolve's physician contract review services, call 877-758-3318 or click here.