Philadelphia Medicine Summer 2018 - 23

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Compensation provisions in physician employment agreements
have become very sophisticated in recent years. The employment
agreement may provide for a payment to the physician if he or
she achieves certain productivity-based targets (i.e., RVUs, cash
collected for services personally performed) established in the
agreement. The employer may perceive that a productivity-based
arrangement will encourage and reward a physician's extra effort
and productivity, thereby increasing not only the physician's
compensation but also the overall performance of the employer
organization.

Term and Termination
Contractual provisions regarding expiration or termination
of the employment relationship between the employer and the
physician are among the most critical in any physician employment
agreement. This is particularly true in those situations where
the relationship does not develop and proceed as planned and a
dispute arises between the parties.
Therefore, it is important to carefully consider and accurately
document the various circumstances or events that can trigger the
expiration or termination of the agreement, and the effect of any
such expiration or termination on the various rights and obligations
of the parties. In the case of an agreement that automatically
renews for successive terms, there should be a sufficient advance
notice of non-renewal provision that will enable the agreement to
expire in an orderly manner, as termination provisions often affect
important rights related to compensation and the enforcement
or relaxation of restrictive covenants.
Physician employment agreements usually provide for the
possibility of an early termination of the agreement prior to
scheduled expiration dates, either automatically, "without cause"
or "for cause." Provisions for termination of an employment
agreement "without cause" commonly permit the termination to
be initiated by a party "for any reason or for no reason," typically
after the terminating party has given the other party advance
written notice (e.g., 60 or 90 days) of such termination.
The employment agreement will typically provide that a party
may terminate the agreement "for cause" if certain circumstances
occur because of an act or omission by the other party. The parties
and their counsel should carefully consider the acts, omissions or
occurrences that may give rise to a "for cause" termination of the
employment agreement, and the means by which the termination
is to be effected (i.e., whether the termination will be automatic
upon occurrence of the specified events or will require a notice
of termination from the terminating party, or may occur only
after notice and an opportunity to cure).

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Each employment relationship is different and unique, and the
"for cause" termination provisions in any employment agreement
should be tailored to the specific desires and needs of the parties to
that agreement.
Regardless of the basis on which the employment agreement
expired or was terminated early, the agreement should specify the
effect of the expiration or termination on the obligations of the
parties thereunder. For example, the agreement might confirm the
obligation of the employer to pay the physician for all base and/
or incentive compensation earned (on a prorated basis) through
the termination date as well as all unreimbursed business expenses
incurred by the physician to that date.
The agreement should also specify the obligations that will
survive and continue to be performable after the termination
date (including the obligation to cooperate with the employer in
connection with the defense of claims or lawsuits against the employer,
and covenants not to compete, confidentiality covenants and other
post-termination restrictive covenants).
Continued on page 24

Summer 2018 : Philadelphia Medicine 23
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