What will you do if your dream job turns into a nightmare you can’t escape - or can leave only at great expense? The best time to plan your exit strategy is before signing your employment agreement.

Initial and renewal employment terms
Your agreement will define the initial term (period) of your employment, and may define renewal terms, as well. A one-year term offers more flexibility than a longer commitment. Automatic renewal terms allow either party to notify the other of its intent not to renew, typically 90 days’ notice before the expiration of the current term. 

How can you be fired?
Your agreement will probably contain a section describing how your employer may terminate your employment “for cause”. Reasonable causes include losing your medical license, credentials, or participation in insurance plans, your death or disability, failure to perform your duties, violation of policies and procedures, conviction of a serious crime, fraud or dishonesty, substance abuse, and endangering patients or others.

Marginal causes include behavior that may damage your employer’s reputation, including making derogatory comments. Vague or broad language increases your risk of being fired capriciously.

Look for a provision that allows you the “opportunity to cure” a cause, typically within 10 days after receiving notice from your employer. Assess the risk of termination by asking your prospective colleagues why physicians have left the practice. (See Use Your Prospective Colleagues as Surrogates to learn more.)

How can you quit? Can you quit?
“Termination without cause” language enables both you and your employer to terminate the agreement upon written notice to the other. Again, 90 days’ notice is typical. While you give up a degree of job security, and your employer gives up some advantage to retain you, you both gain flexibility to resolve a difficult situation.

Repay your incentives
Your employment agreement may require that you repay certain recruiting incentives, such as your signing bonus and relocation expense reimbursement, if you leave before the end of the initial term of the agreement. While such language is reasonable, it should prorate repayment over the length of the term.

Forfeit your bonus
You may forfeit part of, or your entire, productivity incentive bonus when you leave the practice. Some agreements require you to be employed on the last day of the incentive period to receive any bonus. Other agreements prorate the bonus if your employment term expires earlier. The best agreements prorate the your bonus to the last day of employment

If the compensation model calculates productivity incentives based on your collections or profitability, you will probably forfeit the bonus you might have received for amounts collected after you leave. If productivity incentives are calculated based on your work RVUs (relative value units) or charges, the compensation model may calculate your bonus through your last day of employment.

Your departure may also affect your performance incentives, if any, for clinical quality (pay for performance), patient satisfaction, and “good citizenship” (being a collegial colleague).

Pay your malpractice tail insurance premium
If your employer provides claims-made malpractice insurance, you will need “tail” coverage to extend your protection if a legal action is filed when the policy is no longer in effect, e.g., after you have left the practice. (Occurrence policies protect the physician indefinitely, so they do not require tail coverage.)

Since your employment creates liability which continues after your employment ends, your employer is ethically obligated to pay your tail insurance premium (Reasonable exceptions are if you are fired for cause or if you terminate the agreement without cause.) Most employers, though, are reluctant to pay tail insurance premiums because of the expense, which is typically the equivalent of six months’ to two years’ premium on the underlying policy, depending on how long it has been in effect. Some employers pay a share of the tail insurance premium, which may increase with your length of employment, e.g., 20% after one year, 40% after two years, and so on.

If your prospective employer will not agree to pay the tail insurance premium, you may wish to offset this expense by negotiating higher compensation or a retention bonus to be paid upon renewal of each employment term.

Your covenant not to compete
Expect your employment agreement to contain a restrictive covenant preventing you from practicing in a geographic area for a year or more after you have left the practice. While it is understandable that your employer wishes to prevent competition from a former colleague, both the restrictions must be reasonable. The restrictive covenant may not be an issue if you expect to leave the area. If you plan to stay, though, you may wish to negotiate to delete the restrictive covenant entirely.

Alternatively, negotiate a shorter restricted period and smaller restricted area, e.g., you may not practice medicine for one year within the area from which your practice location, not all of the employer’s locations, draws 75-80% of its patients. To avoid disputes, define the restricted area by established geographic boundaries, e.g., zip codes, municipalities, highways, rivers, rather than a fixed distance from the practice location. In the end, ask yourself if you can live with the non-compete restrictions.

The best laid plans
Although you may be joining the practice with high hopes, (as commonly adapted from Robert Burns’ poem, To a Mouse), “The best-laid plans of mice and men often go awry.” Plan your exit strategy before your sign to keep from getting trapped!