John K. McGill, MBA, CPA, JD, and Patrick D. Craig, JD
Making the decision to terminate an associate doctor is rarely easy. Often, associates are hired with long-term plans of ownership, and altering those plans when the associate isn't living up to expectations can be stressful. However, by implementing the following recommendations, doctors can protect their practices and ensure that the termination process goes as smoothly as possible.
• Read the agreement - Familiarize yourself with both parties' obligations in the associate's written employment agreement. Pay particular attention to the termination provisions, and note the reasons for which the employee may be terminated for cause, as well as any required notice for termination.
• Cause vs. without cause - Even if the associate's actions do rise to the level of cause as defined in their employment agreement, most doctors choose to terminate without cause, since doing so reduces the risk of an argument and/or litigation from the associate. Although terminating without cause may entitle the associate to unemployment benefits, the costs of such benefits typically don't outweigh the cost, stress, and inconvenience of a protracted argument and/or litigation.
• Write it down - Leading up to the termination, carefully recording performance issues as they arise, discussing them with the associate, and providing a timeline for correction can help justify a termination for cause. A written termination letter can prevent any future disagreements about the timing of the termination, and can minimize the risk of a he-said-she-said argument regarding the reasons for termination. Finally, carefully documenting any evidence of a post-termination breach of the associate's restrictive covenants can be vital when seeking to enforce the practice's rights.
• No knee-jerk reactions - Avoid acting "in the heat of the moment," since doing so often leads to saying or doing something that you will regret (e.g., angry texts or emails). Instead, investigate any incidents thoroughly, making sure to hear the associate's side of the story, and then make an informed decision after tempers have cooled.
• Be consistent and concise - The termination itself tends to be an awkward conversation for both parties. Avoid prolonging the discussion with apologies or unnecessary explanations regarding why the relationship didn't work out. If you are terminating the associate without cause, resist the temptation to provide reasons for the termination. If you are terminating the associate with cause, provide a clear, concise explanation of the reason for termination and leave it at that.
• Have a plan - Conduct the termination in a way that is respectful to the associate. To the extent possible, plan ahead and avoid making a spectacle. If the associate needs to get something off his or her chest, let them do so (but avoid creating an argument). If notice is required to terminate without cause, strongly consider terminating the associate effective immediately and simply paying the person for the remainder of the notice period (if permitted by the associate's employment agreement). Lastly, when informing staff and patients, provide as few details of the reasons for the termination as possible.
• Termination "to-do" list - Address logistical matters, such as having the associate remove his or her property from the office and return any practice property in his or her possession (including digital property), changing any passwords, codes, or credentials to which the associate had access, revoking any authority for the associate to act on the practice's behalf (e.g., check writing, supply ordering, etc.), and taking care of final payroll and benefit details.
• Malpractice coverage - If your practice has a claims-made malpractice policy, be sure to take appropriate steps to ensure that the practice is covered through any applicable statutes of limitation.
• Restrictive covenants - Use a written termination letter to remind the associate of his or her restrictive covenant obligations. If you become aware of a post-termination breach of the associate's restrictive covenants, don't sit on your rights. Doing so can potentially inhibit your ability to seek relief later.
• Seek counsel - Don't hesitate to contact an attorney early in the process. Remember, it is better to consult an attorney before you need one than after you do something that you can't take back.
While no amount of preparation will transform the termination of an associate into a pleasant process, a thoughtful, purposeful approach will allow the practice to move forward and begin focusing on the future.
John K. McGill, MBA, CPA, JD, provides tax and business planning services and Patrick D. Craig, JD, provides legal services exclusively for the dental profession. The McGill & Hill Group, LLC, is your one-stop resource for tax/business planning, practice transition, legal, retirement plan administration, CPA, and investment advisory services. Visit www.mcgillhillgroup.com.
