Addressing proposed reductions, terminations of contract during pandemic.
Read Part 1 here.
As hospitals struggle with declining patient volumes, they may request that physicians agree to reduce their hourly rates or agree to reduce staffing in the emergency departments. While agreeing to such concessions will help the hospital meet its budget and may show that the physician is being a “team player,” physicians are not required to agree to any contract modifications.
If a physician does not agree to an employer’s proposed contract modifications, the employer has several options:
- The employer may choose to impose the modifications without the physician’s consent. This could make the employer liable for breach of contract. A lawsuit would be required to enforce the physician’s rights, although complaints to the state or federal organizations such as the hospital licensing board, hospital association or the state medical association may give the employer reason to reconsider a blatant contract breach.
- The employer could terminate the contract immediately if it alleges that criteria allowing “for cause” termination have been met. Keep in mind that contracts often contain vague language permitting employers to easily invoke “for cause” terminations. However, every contract also contains an implied covenant of “good faith and fair dealing,” so an employer’s decision to terminate a contract “for cause” shortly after the physician’s refusal to agree to a contract modification would probably not be viewed favorably by a court.
- The employer may provide written notice of its intent to terminate the contract without cause. If an employer wanted to act in bad faith, since most contracts don’t contain a minimum number of shifts for which a physician must be scheduled, the employer could then reduce (or eliminate) the number of shifts available to the physician prior to the termination date. Again, constructive contract termination by failing to schedule a physician for any shifts would probably not be considered as “good faith and fair dealing” by a court.
If a physician does agree to a voluntary reduction in pay or hours, then the employer would forward a written addendum to the agreement specifying the agreed-upon reductions. Keep in mind that proposed reductions are always negotiable and there is strength when negotiating in groups. If the parties agree to modify the contract, the changes should ideally specify a timeframe (such as three to four months) or list criteria (such as returning to > 80% pre-COVID ED volumes for two consecutive months) that would cause the pay/hours to revert to “normal.” The parties could then revisit the issue after three to four months if patient volumes have not increased.
How to Address Termination or Rescission of a Contract
Contract termination presents few options for mitigation. If a physician’s contract is terminated, the physician needs to find another job. However, there are a few issues to consider when faced with a contract termination.
Is a contract rescission really just a change in the start date?
As with one of the case scenarios described above, a decision to rescind a contract may amount to just a delay in the contract start date. The promise of a future position with an organization may entice a physician to wait for the job to materialize. However, if a company has no work available now, recurrent waves of coronavirus and unpredictable future patient volumes may result in no job availability in the future. When presented with the option of delaying a start date, it may be wise to seek other positions rather than waiting for a future job to materialize.
Did a contract breach occur?
Just because an employer terminated an agreement doesn’t mean the employer did so legally. Violating the terms of an agreement is a contract breach and can amount to hundreds of thousands of dollars in damages. While seeking alternate employment, having an attorney review the circumstances of the contract termination may also help a physician to eventually recoup losses from a potential contract breach. Depending upon the circumstances, breach of contract, bad faith, promissory estoppel or even fraud are all possible legal actions that could be initiated.
Nullify noncompete clauses
Noncompete clauses are not enforceable against emergency physicians in many states as a matter of law. If an employer terminates a contract because of COVID-related issues, the employer should have no business interest in preventing the physician from working in the same area. Any restrictive covenants contained within a terminated employment agreement should be nullified. Get such guarantees in writing.
Avoid working with disreputable hospitals and staffing companies
As occurred with one of the physicians in the examples above, some temporary staffing companies will terminate scheduled shifts/contracts with little or no notice. Some hospitals schedule temporary physicians as “insurance” for shift coverage and then cancel the shifts with short notice if a lower-paid alternative staffing solution can be found.
Read through temporary staffing contracts carefully and do not agree to arbitrary shift termination. If you have been the victim of sudden shift cancellation, report the incident to the National Association of Locum Tenens Organizations (www.nalto.org). Cancel contracts with staffing companies or hospitals that engage in this conduct.
General Recommendations to Mitigate Job Loss
ALWAYS have staff privileges at more than one facility
There is no legitimate business reason why groups or hospitals should demand that physicians have staff privileges at only one hospital. If a physician is on staff at one facility and that facility reduces the physician’s hours or wages, the physician has no ability to mitigate a loss in income by picking up shifts at other facilities. Worse, if the physician’s contract is terminated, he would have to find another job, possibly obtain licensure in another state, go through hospital credentialing and go without several months’ pay while waiting to obtain hospital privileges.
I have seen emergency privileges get pushed through in a couple of weeks, but I have also seen hospital privileging take more than nine months. Being on staff at multiple facilities makes it much easier for a physician to mitigate adverse job actions at one facility.
Have an emergency fund
According to the Pew Research Center, less than half of all adults have an emergency fund that would last for three months.[i] Creating a readily available emergency fund for circumstances such as job loss or major illness is important. Set aside enough money to cover one month’s expenses and then build upon that savings. Recommendations from financial professionals range from having funds to cover between three months and six months of expenses.
Consider student loan forbearance
Student loan payments amount to a large monthly expense. President Trump signed an executive order extending temporary cessation of payments and waiver of all interest on student loans held by the Department of Education until Dec. 31, 2020.[ii] Private student loans are not subject to this order. This executive order will free up student loan money to temporarily be used for other purposes. However, when the order expires, loan payments will resume. If financial difficulty continues after the order expires, lenders offer loan forbearance which will stop payments on loans for several months. Contact your student loan lender for further information.
Apply for unemployment (if eligible)
Unemployment benefits don’t amount to a lot of money, but the income provided is better than no income at all. Each state has different rules regarding unemployment benefits. Doing a web search using the term “how to apply for unemployment in [your state]” will provide more information. Note that independent contractors and locum tenens physicians are probably not eligible for unemployment benefits.
Consider other sources of income
Branch out. Physicians can write books, review medical records, work administratively, provide expert witness services, invent medical products, work independently with companies, open a specialty clinic, perform telehealth visits or can branch out into other entrepreneurial ventures. The sky is the limit!
Despite the spending habits of some healthcare-related venture capital firms, coronavirus has caused a significant financial rift in the healthcare industry. Understanding how to review and enforce language in your employment contract may help you to navigate adverse employment actions or potential job loss, but having a contingency plan and considering alternate sources of income during a crisis will help ensure financial stability.