Excerpted from The Biggest Legal Mistakes Physicians Make: And How to Avoid Them

Edited by Steven Babitsky, Esq. and James J. Mangraviti, Esq. (©2005 SEAK, Inc.)

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Executive Summary

Terminating an employee is probably the most difficult personnel decision a physician can make. Contrary to popular reality television shows, “You’re fired” is not easily said. Often, a termination is an emotion-charged event for employee and employer alike. If not carefully handled, a terminated employee may file claims for workers’ compensation, wages due, wrongful discharge, and/or employment discrimination with related claims for personal injuries, such as infliction of emotional distress or defamation. Defending such claims is time-consuming and costly. Properly managed terminations can avoid such claims or, at a minimum, provide physicians with viable defenses and limit the disgruntled employee’s claims. 

Mistake 1     Not Having an Express “At Will” Employment Agreement

In general, employment may be terminated either “at will” or “for cause.” At-will employment agreements provide that an employee can be discharged at any time, for any reason, with or without advance notice. For-cause agreements provide that an employee can be discharged only for good reason. Often, for-cause agreements also require that, whenever possible, an employee must be given advance warning with an opportunity to improve. Physicians who do not have express at-will agreements with their employees do not have as much latitude in making termination decisions as physicians do who have ensured that employment is at will.

Action Step     Physicians should provide for at-will employment by giving notice in personnel management materials and documents that employees sign.

Written notice of at-will employment should be included in employer policies and procedures and documents that employees sign (e.g., application forms, acceptance and/or offer letters, receipt of employee manuals or handbooks, disciplinary notices, and descriptions of benefits). Language indicating that employees’ at-will employment status may be changed only by a written agreement signed by the manager of the practice should also be included.

Mistake 2     Implying That Termination Will Be Only “For Good Cause”

If employment is not expressly terminable at will, under certain circumstances employment can be interpreted as terminable only for cause. Some factors that may give rise to an implied agreement to terminate only for cause are oral or written promises of continued employment, a history of positive performance evaluations with regular promotions and merit increases, longevity of employment, or an employer’s practice of terminating only for good cause. If such conditions exist, physicians should consult with legal counsel to determine whether an employee may be discharged at will or if other conditions must be met first.

Action Step     Physicians should not engage in conduct that could transform at-will employment to an implied agreement to terminate only for cause. They should reaffirm employees’ at-will employment status whenever possible.

Mistake 3     Not Spelling Out What Types of Conduct May Result in Termination

Regardless of whether employment is terminable at will or for cause, many physicians’ offices fail to have guidelines on what type of conduct could result in termination.

Action Step     Physicians should give employees written guidelines that they sign and that describe the types of misconduct that may result in termination.

Employee manuals, handbooks, and/or written policies and procedures should include examples of terminable offenses, especially for such misconduct as tardiness, absenteeism, failure to adhere to professional standards in conduct and appearance, drug and/or alcohol use that impairs an employee’s judgment, violations of patients’ rights to privacy, violence in the workplace, dishonesty, abuse of telephone and/or computer access privileges, and discrimination or harassment of other employees, vendors or patients. Catch-all language indicating that the practice reserves the right to terminate for additional reasons that are within its sole discretion also should be included.

Mistake 4     Believing That Progressive Discipline Is Always Required

A common disciplinary method, known as progressive discipline, generally requires that prior to termination an employer must follow a rigid pattern of imposing discipline. First, the employer must give one or more informal oral warnings. Next, the employer must give one or more written warnings. Thereafter, the employer may impose penalties, such as suspension without pay. Only after all these steps have been taken can the offending employee be fired. Many physicians mistakenly believe that they must adopt this disciplinary system. However, outside of the unionized or civil service setting, this type of system is not required by any laws or regulations. Even agreements to terminate only for cause do not require adherence to such a formal disciplinary system. Well-written for-cause documents (such as employee handbooks and application forms) usually provide a shortcut to termination if the offending conduct warrants immediate discharge (e.g., violence in the workplace or intentionally endangering a patient). 

Action Step     Physicians should implement, in writing, a flexible system of discipline that enables the practice to manage employees and terminate when necessary, with or without prior warning or notice.

Mistake 5     Delaying Termination or Transferring the Employee in the Hope That Conduct or Performance Will Improve

Physicians, like employers generally, usually are reluctant to terminate employees who do not meet expectations. For example, physicians’ offices may choose to extend a newly hired employee’s probationary or training period instead of terminating the employee when problems appear, such as chronic tardiness, unexplained absences, unprofessional behavior, uncooperative attitudes, or inability to follow office procedures. Furthermore, in an attempt to avoid termination, physicians sometimes decide to transfer offending employees to other positions, reporting structures, or departments in the hope that a change of job duties or surroundings will result in improvement.

Action Step     Physicians should be vigilant when dealing with employees who exhibit conduct or performance problems and terminate rather than continue to keep them employed. Unless a problem is directly related to the performance of a specific task that experience has shown is difficult to learn, it is highly unlikely that a new hire’s performance will improve over time. New employees usually are on their best behavior at the outset of employment, when they need to prove they can do the job. If their “best” falls short, physicians should terminate. Problems that show up at the beginning usually stay problems and often become worse. The same is true for regular employees with problems: If they do not improve within a set period of time after having been warned of their deficiencies, they should be terminated. Physicians should not use transfers as a means of avoiding termination. Although on rare occasions a transfer may succeed, generally the adage of a single rotten apple’s spoiling the whole basket holds true. A difficult employee tends to remain a difficult employee no matter where he or she works in the office or to whom he or she reports.

Mistake 6     Signaling to Employees That They Will Be Terminated

Physicians who have decided to discharge an employee sometimes give signals in advance that they have made the decision to terminate the employee. Such signaling should be avoided because an employee who knows termination is coming has the opportunity to engage in preemptive actions (e.g., going on “stress” leave, filing claims for worker compensation or harassment or discrimination, or complaining about other terms and conditions of his or her employment). These types of employee claims can affect the termination decision by raising the specter that the employee is being terminated in retaliation for engaging in protected conduct (a virtual presumption under current California law). Adverse employment actions, such as termination, may be regarded as retaliatory, and retaliatory conduct qualifies as a separate violation of a multitude of employment laws and regulations.

Action Step     Physicians should not tip off employees that they are going to be discharged. They should make arrangements for issuance of final paychecks, benefits information, and/or exit interviews with those who have a need to know and can be trusted to maintain confidentiality. Physicians who own or operate practices employing more than 100 people and who plan to engage in a “mass layoff” of 50 employees or more should consult with legal counsel because the provisions of the federal Worker Adjustment and Retraining Notification (WARN) Act may require advance notice. (State law variants of the federal act exist as well.)

Mistake 7     Terminating Employees without Considering the Employees’ Protected Status

Physicians often decide to terminate a problem employee without considering whether the employee belongs to a protected class. A plethora of federal and state laws prohibit employers from engaging in adverse employment actions, such as terminations that are motivated, even in part, by the employee’s protected status. For instance, civil rights laws prohibit discrimination or harassment on the basis of employees’ race, color, gender, pregnancy, sexual orientation, religion, national origin, ethnicity, mental or physical disability, age, or veteran status. Other laws prohibit adverse employment actions against employees who are on jury duty or military leave, who have been subpoenaed to testify, or who have “blown the whistle” on the employer. Terminations for garnishments of wages or complaints filed by the employee about payroll violations also may be circumscribed.

Termination decisions that are not carefully examined to ensure that they do not run afoul of applicable laws will cause great trouble to a physician’s practice.

Action Step     Physicians should consult with a knowledgeable human resources professional and/or employment counsel before terminating an employee to make sure that the termination does not violate applicable laws protecting the employee. Especially laws protecting the disabled or pregnant employee must be considered because those laws require employers to provide reasonable accommodation of the disability or pregnancy for employees who are otherwise qualified to perform the essential functions of the job. “Reasonable accommodation” may include modification of job requirements, including attendance, transfer to an available less strenuous assignment, and other measures designed to help the disabled or pregnant employee perform the functions of the job.

Mistake 8     Giving Employees a Reason, False or Otherwise, for the Termination

Employees who are being terminated usually demand to know the reason. Physicians who do not have an agreement with their employees to terminate only for cause do not have to give a reason for a termination decision. Often, physicians want to “soften the blow” by calling the termination a layoff instead of an involuntary discharge. In general, a layoff implies that the employee has been terminated because the position has been eliminated or the practice is retrenching financially and the employee is eligible for rehire when circumstances improve. Unless the circumstances warrant using the term, physicians should not call an involuntary discharge a layoff. Likewise, physicians should not give a false or misleading reason for a termination. If the employee files a claim against the practice, such matters as the reasons given, whether orally or in writing, are in dispute, and physicians can have their credibility challenged if they provide different reasons for the decision during the course of defending against the employee’s claims.

Action Step     Physicians who are going to give one or more reasons for a termination should prepare the wording carefully and have it checked by an experienced human resources professional and/or employment counsel. Physicians should not let the terminated employees pressure them into saying more than they have cleared with their advisers.

Mistake 9      Conducting the Termination Interview Alone and without Proper Advance Preparation

Termination interviews are seldom pleasant. Employees may be confrontational or emotional in other ways. One of the biggest mistakes physicians can make is to conduct a termination interview alone. The second biggest mistake is to conduct a termination interview unprepared and simply to “wing it.”

Action Step     Physicians should prepare carefully for the termination interview and have a checklist of topics to be covered and materials to be handed out or collected. They should not conduct the termination meeting alone.

Whenever an employee is terminated, physicians should make sure that at least two people other than the employee are present: one conducts the termination; the other is a witness who takes notes of the meeting. Before the meeting, the physician should prepare a list of items to be covered (e.g., presentation of the final paycheck, arrangements for payment of outstanding reimbursable expenses, recovery of office equipment and security information, postemployment benefits, and methods of dealing with job reference requests). The physician should ask the employee for and obtain all office keys, access codes, computer passwords, identification badges, and office equipment (e.g., cellular phones, beepers, and laptop computers). If the employee does not have the information or equipment immediately available, the physician should accompany the employee to the location where they are kept or, if not on the premises, obtain a signed, written agreement from the employee that the requested materials will be returned by a date certain. The physician should conduct the termination discreetly, preferably near the end of the workweek so that office gossip can be kept to a minimum, and allow the employee time to clear out his or her workspace under supervision. If necessary, the physician should make arrangements with the employee to have someone present on a weekend. Also, the physician should document the materials the employee takes and have the employee sign the documentation. The physician also should prepare a neutral statement to explain to other staff why the terminated employee is no longer at work, without making the employee “an example” or disclosing information about the reasons for the termination to persons other than those with a need to know.

Mistake 10   Offering a Termination Package without Obtaining a Release of Claims

Often, in an attempt to overcome feelings of guilt for terminating an employee, physicians offer the employee severance pay without obtaining a release of all claims. Sometimes the practice has a formal severance policy set forth in employee manuals or offer letters. In those cases, the terms of the policy must be followed. In all other cases, severance is entirely discretionary and, if offered, should be expressly conditioned on the employee’s agreeing not to file any employment-related claims against the practice, other than a claim for unemployment benefits where applicable.

Action Step     Physicians should consult with experienced employment counsel before offering severance pay to a terminated employee and obtain the necessary written severance agreement and release of claims. Releases for employees who are over age 40, for instance, must conform to the special requirements of federal law.


Physicians who want to manage their employees effectively must be prepared to terminate ineffective employees. Because of the many traps for the unwary that exist in carrying out terminations, physicians should always consult with experienced human resources professionals and/or experienced employment counsel before discharging an employee.

Written by:

Rosa M. C. Cumare, Esq.

Peer reviewed by:

David J. Hamilton, Esq.

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