Backing out of a contract

[Eyes4sucess]

Here's the scenario,

My co-resident that just finished is joining a practice in a particular location she wanted to live in and she signed a 1 year contract  with a No-Compete clause within the area that she's planning to start in late August. However, just recently there was an opening at another practice in the same area and they are wanting her to join and offered her a job. The salary, vacation time,  and benefits are better. She likes the style of practice better and has a few regrets with signing a contract with the 1st practice. What would you guys do?

It's a really tough decision as she feels that she made a commitment to the practice she's joining and they've made a lot of accommodations already, so there would be a lot of guilt if she ended up not honoring her contract and joining the other group. However in terms of what's in her best interest and what would be better for her family would be to join this other new practice. I advised her to take the second job as she's always had her eyes on that particular style of practice. However a few questions popped up that we don't know the answers to.

Are there any legal consequences by backing out of a contract? Financial consequences by backing out of a contract? Again her contract's effective date isn't until the end of August.

What would you guys do?

I know that it really sucks for the first practice she committed to, and that they already made a lot of accommodations and set her schedule, but this is HER life.  Thoughts?

[SValleyMD]

Doubt a private practice group would lawyer up for someone that isn't going to take away patients or market share

[Rotish]

She doesn't owe the first group anything. I'm sure both practices will be taking advantage of her until she becomes a partner.

I'd figure out the specifics of the noncompete though, and see how it applies before starting

[q-school]

did she take a signing bonus?  how big is the first group?  how friendly are the two groups?

my hospital would let her out of her contract.

no way they would let her stay in the community though.

 

it's weird (to me) that it got this far however.  she interviewed with both groups at the same time?  or even after she signed the contract, she was still interviewing?

[q-school]

Rotish wrote:

She doesn’t owe the first group anything. I’m sure both practices will be taking advantage of her until she becomes a partner.

I’d figure out the specifics of the noncompete though, and see how it applies before starting

Click to expand...

is that really fair to say she doesn't owe the first group anything?  the first group stopped looking after she signed.  they may be forced to go without a physician for a full year because of the timing of her decision.   it sounds like they worked with her to make a mutually acceptable situation.  yes there are costs of doing business, but i wouldn't personally go so far as to say she doesn't owe anything to the first group in this situation.

ymmv

 

[StarTrekDoc]

The cost of recruitment isn't negligible and the prime time for recruitment is over.

The practice may let her out, but probably will seek financial damages to recover.   I wouldn't be surprised it that happens.

[eyes4success]

You're right, but what range would you think the "financial damages" would be? I've read in other forms about  that-but I haven't seen too many physicians post their own personal experiences of backing out of a contract. I'm sure it's happened many times before. I think she can deal with $5,000 for financial damages but anything more might be too much

[eyes4success]

A few bit more details

1st practice: Small community private practice with option of making partnership

2nd practice: larger corporation (think Kaiser).

 

She interviewed at both places, but the 2nd practice didn't at first have availability in the location she desired. Just recently there was a spot that opened up and so they contacted her back saying they would love to have her

[Craigy]

It depends on the terms of the contract.  I wouldn't bail without getting advice from a local contract attorney.

Does 2nd practice know she's already under contract?  Would they even take her, knowing there is a noncompete?  Don't let go of the first branch until you have a firm grasp on the next...

 

[Zaphod]

eyes4success wrote:

A few bit more details

1st practice: Small community private practice with option of making partnership

2nd practice: larger corporation (think Kaiser).

 

She interviewed at both places, but the 2nd practice didn’t at first have availability in the location she desired. Just recently there was a spot that opened up and so they contacted her back saying they would love to have her

Click to expand...

So why is the second one better?

Can she use the 2nd contract to sweeten the first an make it better?

[Donnie]

I agree that I would get an attorney to look into it.  These laws vary from state to state.  One key point would be whether the person received any consideration for signing the contract, i.e. a signing bonus.  I also agree that I would let the 2nd practice know about the non-compete, otherwise the person may end up without a position anywhere.

If (i) there wasn't any consideration given for signing the contract/non-compete and (ii) the person didn't start yet so can't take any patients or "secret sauce," I think enforcing the non-compete would be a challenge. As far as damages go, they would be hard pressed to come after anything other than the signing bonus, but IANAL.

[q-school]

if i'm the first group no way do i let someone go to kaiser-type.

$5,000?  no way.  it probably costs more to have the signing bonus undone.  plus fees paid to a recruitment firm, cost of recruitment.

generally, as stated above, we let people leave, but no way to staying in community in these situations. of course, we are the kaiser type though.   i guess she could start the first job and give notice and then do locums for a year and come back to the kaiser position.  of course kaiser may just recruit someone else during that time frame.

i get that you are trying to be helpful, but she needs professional advice.

what state is this in?  how enforceable are the noncompetes?  can they be bought out?  what is the perceived risk (from the smaller group) of patients leaving the first group to follow her to the second?

i hate these situations.  if i'm the second group, i don't make these offers either.  if someone will do this to their first group, they would knife me someday as well.   for sure if it doesn't work out at kaiser, she has to leave the community (if she is not in a major city where noncompetes can not be enforced).

 

 

 

 

[jz]

My husband just signed onto a regional shop.  He was warned by his own lawyer that if he backed out now, the shop could go after him for any locums cost of his replacement. " Damages"  could mean locums costs.

[Donnie]

My advice was to consult an attorney.  Regarding damages, do you also sue the person if they quit to try to recover recruitment costs?  And what exactly do you mean by "no way do I let someone go."  You litigate this too?  Because that's your only option if the person violates the non-compete.  If you just go and harass the new employer, then you run the risk of getting sued yourself.  Assuming you do litigate such matters, have you won cases in instances where the person received no consideration and did not even start the job?  I have been involved in non-compete cases, and they are going to be very hard to win with that set of facts and circumstances.  Most non-competes become effective on the start date.

As a bit of advice, if your business develops a long history of litigating former employees, you are going to get a horrible reputation.

[portlandia]

Consult an attorney. Do not accept the 2nd job without professional advice.

I backed out of a contract renewal and the hospital system came after me for damages. They limited it to my vacation balance (~20K) but the attorney said it could have been much worse.

It could be argued that you would be liable for daily damages until a new physician is recruited and hired, plus any expenses associated with your recruitment (could be tens of thousands of dollars). Non competes are typically harder to enforce.

My 2 cents