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Check in with counsel and stay on top of what your state and the federal government may be doing to assist medical practices and other small businesses to survive.
Physician practices are currently struggling with how to handle physician and mid-level employment contracts in light of the COVID-19 pandemic. Although a practice may not be “required” to close, many have cancelled elective visits and procedures. This has greatly impacted patient volume and revenue, and may require full closure eventually. Even in practices that must offer some patient services, cutbacks are imminent.
Physician and mid-level employment agreements generally do not contemplate extreme situations such as COVID-19. Most contracts are terminable either without cause (which typically requires 30-90 days prior notice) or for cause. Employment contracts invariably require both the employer and employee to agree to any amendment. As a result, an employer risks potential liability if it unilaterally reduces a provider’s pay or hours.
While there are common law doctrines which arguably provide a basis for a practice not to fulfill its obligations under an employment agreement, the applicability of those doctrines to a situation such as the COVID-19 pandemic is uncertain.
As a result, practices are faced with the need to negotiate with salaried employees for reduced hours and/or compensation in order to remain in operation during this pandemic. Many practices have successfully negotiated such deals since some staff want to be home and others are willing to take less pay or work fewer hours to preserve their benefits and their job. But remember that any such modifications to employment contracts should be in writing to be enforceable and to avoid liability based on a breach of the agreement because the practice failed to follow the terms of the contract. You should refamiliarize yourself with any paid time off or other policies your practice may have in place! Also, make sure that you are offering similar deals to all contacted practitioners to avoid any claims of illegal discrimination.
For practices that have employees who are unable or unwilling to cut back or accept modifications to their contracts, a practice may have no choice but to provide notice of termination and to do so as soon as possible. E.g., if this pandemic continues for 90 days but the notice period in a provider’s employment agreement for termination without cause is 60 days, the practice will at least get relief from its obligations to compensate the provider after 60 days, but before the pandemic ends. While termination of a valued employee under these circumstances is unfortunate, it may be unavoidable. Paying an employee during the notice period may also be a challenge for many practices which may be struggling to survive in the coming weeks.
Read More: Coding during the Coronavirus pandemic
The following are the steps that should be followed by practices at this time as closures and layoffs become necessary:
The current situation is fluid and available guidance is changing rapidly. Check in with counsel and stay on top of what your state and the federal government may be doing to assist medical practices and other small businesses to survive.
Ericka L. Adler, JD, LLM has practiced in the area of regulatory and transactional healthcare law for more than 20 years. She represents physicians and other healthcare providers across the country in their day-to-day legal needs, including contract negotiations, sale transactions, and complex joint ventures. She also works with providers on a wide variety of compliance issues such as Stark Law, Anti-Kickback Statute, and HIPAA. Ericka has been writing for Physicians Practice since 2011.