Termination: The costs of termination and strategies to avoid them

What would you do if someone forced you to hand over a check TODAY for $184,000? Some of us might request a second mortgage on our homes, beg friends and family for loans, go to Payday. Maybe a few of you would say “No sweat, I’ve got it.” Most of us would turn red then green and change our identities. Leaving your job could result in a request like this, as it did for a young OBGYN we worked with after barely two years into practice.

Our goal at Contract Diagnostics is to make sure this day never comes for you. So how do we do that? We’re determined to talk termination!

You haven’t even started your job, and already we’re talking about leaving it? Precisely! If you’re like most people, you don’t want to go into a job negotiation with talks of leaving. We know how unpredictable life is though, so let’s plan for the worst and hope for the best.

Why would you leave a job? It’s not as advertised…too little work, too much work, the people are not who you thought they were; you found a new passion and you want more time to explore that; you had a child and want to stay home to spend more time with the little one; your partner’s job moved across country and you’d prefer to live together; you want to explore the mountain biking on the west coast as opposed to the Midwest. This list barely skims the surface.

Why would a job ask you to leave? Their department budget no longer affords you; restructuring within the hospital system; you committed an egregious crime and lost your medical license.

Note: neither of these lists is comprehensive, I’m simply painting a picture of possibility!  

You’ve likely heard about “The Great Resignation.” Based on recent survey data from a 2022 Mayo Clinic study, 1 in 5 physicians expects to leave his or her job or decrease hours within the next 2 years. Most of those physicians did not anticipate that happening…they are 5, 10, or 20 years younger than anticipated for retirement from medicine! Depending on your search, on average it is noted that greater than 50% of new grads will leave their first job within the first 2 to 5 years. And how many physicians will stay at their jobs for 25-30 years? I couldn’t find that data, but my guess would be nearly 0%. The world is huge, people are mobile, life changes, and for most people, the same job day in and day out does not serve them for decades on end. It used to be the norm for physicians, not anymore. So if you’ll humor me, let’s assume you won’t stay where you currently are or where you’re about to start, and let’s talk about the costs of leaving a job and strategies to recognize, avoid, and/or minimize these.

1. It’s payback time: starting bonuses, relocation costs, student loans. Many jobs will offer a variety of bonus or loan incentives. They promise an extra large first paycheck that includes a starting bonus, they reimburse your relocation from one coast to the other, they even offer to pay off a portion of your student loans for every year that you work with the company. When you first review your contract, check the fine print on each of these! Many of them will need to be paid back if you leave the company within a certain period of time (typically 2-3 years). And keep in mind, these are all taxed as income, but when you pay them back, you’re giving back pre-tax values. If they’re a loan, the job may even require you to pay back a specified interest on the value. Ways to avoid the sting?
   • Negotiate a prorated payback amount, so if you work half of the expected time, you only owe half of the bonus amount.
   • If the job let’s you go without cause, it only seems reasonable that this value is forgiven, so that can be negotiated ahead of time as well.
2. Tail insurance: do you have an occurrence based policy? You’re set! Do you have a claims made policy? Yes. Do you have tail coverage included by the employer? No. Let’s do some math. Based on your field and the amount of time you are with the company, you may owe anywhere from $10,000 to $200,000! If tail coverage is not included with your position, what can you do about it?
   • Negotiate the coverage into your contract. If it matters to you, work to include it!
   • Get an estimate for the coverage and put that money aside for termination day.
   • Negotiate a retention bonus that will help put a dent in that future tail insurance payment if you stick around long enough with the employer.
   • Negotiate the tail coverage be included or at least prorated if you stay for a specified amount of time with the practice, so perhaps in 2.5 years you only owe half of the tail and in 5 years the employer covers it all.
3. Non compete clauses: After you leave your job, you may be restricted by region and specialty for a specified period of time. For example, you may not be able to work within 25 miles radius of your clinic location for 18 months following your termination date. If you want to stay in your current location, then depending on where you live your commute to a new job may be an hour or more! Or maybe you’re doing locums to bide your time before returning to the area. How can you address this?
   • Negotiate the non compete out of your contract. That’s a big ask for an employer. To be frank with you, unfortunately this is unlikely, but it doesn’t hurt to try.
   • Shrink the radius. Some contracts will give that 25 mile radius from every location you work (all 5 clinics and 3 hospitals you have covered while employed by them!), which could black out huge expanses of land. Edit the language to list your single primary location.
   • Create an addendum that states you are not violating this clause if you take a job in a specific field within your specialty. For example, if you an OBGYN like myself, you can negotiate that being a Laborist within the radius does not violate the non compete. Or if you an Infectious Disease physician, negotiate that working in general Internal Medicine does not violate. While it may not be exactly what you want to do, if location matters, these are great options.
   • As per #1(b), negotiate this be forgiven if the employer lets you go without cause. It’s only fair!
4. Health, disability, and life insurance: while your employer may offer these benefits (hooray!), when you leave the job, so do these benefits leave you. The sooner you apply for these individual benefits (namely disability and life), typically the better chance you have of coverage and also the lower the insurance premiums. For health insurance, know ahead of time your COBRA coverage details, alternative insurance options, or marketplace rates.
5. Know your notice: depending on your job, you may have a 30, 60, 90, 120+ day notice period. That means you have to let your job know well in advance that you plan to leave. Make sure you give them that time, or there may be a financial impact. What to negotiate ahead of time?
   • A notice period that serves you. Do you want to be able to cut and run? 30-60 days is probably ideal for you. But if you want to be able to jump from one job into the next, you’re probably going to need at least 90-120 days.
   • The employer should have the same notice period. If they are letting you go without cause, make sure you have plenty of heads up. Certainly not fair if you have to tell them months in advance and they only have to give you 30 days to clear your office.
     

As Yogi Berea once famously said, “It ain’t over till it’s over.” When you are negotiating your contract with a potential employer, heed that fine print! Ignoring it or missing it can lead to costly, stressful mistakes as you can see in this blog. Let us at Contract Diagnostics help you review your contract, understand your personal situation, and help explain how each of these areas could apply to and affect you. We want you to feel confident and prepared in every contract you sign.