Acceleration clause in medical contract could cause significant financial losses

It may seem a little odd to consider how a medical employment agreement might be terminated before you even sign the contract, but language relating to contract termination are some of the most contentiously litigated issues in medical contract law.

A client wrote to me asking for an explanation of the following language in his medical employment agreement:

Either party may terminate this Agreement without cause by providing the other party with ninety (90) days’ prior written notice. If Provider terminates this Agreement without cause, Provider shall be required to fulfill all contracted obligations throughout the ninety (90) day notice period; provided, however, that the Practice shall have the right to accelerate Provider’s date of termination. Upon termination, Provider shall only be entitled to payment for Services rendered through the date of termination as such date may be adjusted as set forth above, and Practice will have no further obligation to Provider for compensation or otherwise.

This language gives either party the ability to terminate the agreement with 90 days’ written notice. Telling your boss that you’re leaving in 90 days isn’t sufficient notice in this case. Once the physician gives notice of intent to terminate, the physician can’t leave early – i.e. “the physician has to fulfill all contracted obligations throughout the ninety day notice period.”

The problem arises with the language “the Practice shall have the right to accelerate Provider’s date of termination.” What does this mean?

Suppose that you find another job and begin the onboarding process at the new facility. In order to avoid breaching your current contract, you tell your current employer that you’re terminating your contract and that you’ll be leaving in three months. That notice period gives your current employer time to find someone to replace you and gives your future employer time to fill out the paperwork and get you credentialed. During the following 90 days, you expect to continue working shifts at your current job. Your future employer then knows to begin scheduling you in three months.

What does an acceleration clause in a medical contract mean?

Acceleration means that the current employer has the ability to say “if you tell us that you’re leaving in 90 days, we have the option of terminating the contract immediately and we’re not paying you for the next three months.” In other words, even though a physician may be counting on three months of income from the current employer before transitioning to the new employer, the current employer can “accelerate” the termination date, take the physician off the schedule immediately, and not pay the physician anything for those three months.

The biggest problem with an acceleration clause is that the ability to invoke the clause is optional. The current employer could decide to enforce it or could choose not to enforce it. That gives the physician little ability to plan ahead when leaving a job.

For example, if the physician assumes that the acceleration clause won’t be enforced and the current employer decides to accelerate, then the physician is terminated immediately, can’t begin working at his new job for several months, and goes without three months pay.

On the other hand, if the physician assumes that the acceleration clause will be enforced and schedules shifts with the new employer immediately after giving notice to the current employer, then schedule conflicts between new and old employers would inevitably occur the physician could be at risk of breaching both contracts.

Acceleration clauses have no legitimate business purpose. DO NOT agree to them. If an employer wants a physician off the schedule that desperately after the physician gives notice of intent to terminate the contract, the employer can pay the physician for the unworked shifts.

Agreeing to an acceleration clause in a medical contract puts physicians at risk of going without several months pay – all at the whim of the current employer.

Need help with with terms in your contract? Trying to mitigate an acceleration clause? Contact me. I’d be happy to try to help.