Timing can be everything with employment contracts

Apr 01, 2003
By dvm360.com staff

It is said that timing is everything and in the law, that expression is often quite true.

If you let a real estate offer run past its deadline by even a minute, you may lose your chance to buy the property. If a district attorney fails to charge a thief until one day after the statute of limitations expires, he's just plain out of luck. When a liquor store sells booze in New York to a man on the eve of his 21st birthday, it's in just as much trouble as if the customer had been in grammar school.

No different

Veterinary employment contracts are no different. Attention to deadlines, dates and expirations is critical and may affect how an associate's life unfolds for years. Such details of timing may also impact the rights of the practice doing the hiring, and the practice owner may not even realize it.

Deadlines and time limitations in veterinary employment contracts usually fall into one of a limited number of categories.

The first is the term of employment (frequently one year) that must have an established starting date and ending date. A second time limitation is that which controls how early an employee has to notify his or her employer when that employee decides to quit.

Conversely, a time limit is usually set for notice to an employed veterinarian who is terminated either for cause or without explanation.

Finally, and frequently, the area left the murkiest in veterinary contracts, is the question of what happens if the employer and employee fail to establish the terms for next year's agreement.

Sense of urgency

Very often, the position taken by the employed veterinarian is that these deadlines are not all that critical. The feelings I frequently hear expressed are along these lines:

  • "It doesn't really matter if we agree to terms before the end of my first contract because it renews automatically."
  • "Plus, if I don't like the new offer, I'll just quit."

This outlook is partly correct, but it is very rare that a practice successfully sues an employed doctor for such a violation. Judges don't like to hear that kind of claim and damages are extremely difficult to establish.

Automatically renewed?

So, given that quitting may not be a big problem, why is it a bad idea to simply allow an employment contract to automatically renew and wait a while longer to badger the boss into signing a new one with more money, more days off and more continuing education? The problem is attached to the non-competition clause.

When parties agree to permit an annual employment contract to renew automatically, they are essentially resigning it, including all of its original terms, for an additional term (again, usually a full year). Some contracts renew the instant that the original term expires; others set forth a notice period such as 30 days before expiration in which the associate must stipulate, in writing, that the contract will not be renewed.

The problem for the associate is that while automatic renewal may not change his right to quit, nor modify the right of the practice to terminate him, it might well trigger a new point from which the non-competition term shall be measured. Therefore, by letting the renewal's "yes-or-no" deadline pass, (even by a day), the associate may be locking in at an extra full year of non-competition prohibition.

Case in point?

Here is an example that our office dealt with last fall:

Doctor A was fairly satisfied though not thrilled with the terms of her employment contract with a very large, multiple hospital practice. Her employment contract, carefully drafted by the group's attorneys, specified that the agreement would renew automatically unless, by 60 days before expiration, Dr. A notified the company that she would not assent to its renewal.

Shortly after the 60-day deadline had passed, Dr. A called me to discuss whether it would be in her best interests to stay on with the veterinary outfit. Dr. A was alarmed and dismayed to discover that she had no real choice but to stay, because she would not be able to seek employment within 20 miles of her present employer for twice as long as she had anticipated. How could this be?

This employment contract provided that in the event the employee or employer wanted to terminate the employment relationship, either could do so by giving 45 days written notice to the other. Therefore, quitting only required notice of a month and a half.

The non-competition period, however, was established as one year and ran for a radius of 20 miles from the employing practice. But unlike the notice term for quitting, which permitted Dr. A to leave a month and a half after giving notice, the non-competition term was set to last one year from the end of the contract term.

Since the contract was originally based on the calendar year, and Dr. A had not given written notice by Nov. 1, 2001 that she would not renew, a new term began automatically on 1/1/2002. The non-competition prohibition, therefore, would not expire until 12/31/03, a year after the automatically renewed new contract term would have expired.

For Dr. A, this would mean having to move away from home for a full two years before returning to work in her hometown.

Is such an auto-renewal arrangement enforceable? The answer depends on many issues, including the state in which the agreement was entered into. The key element, however, is how much Dr. A has in the way of emotional and financial resources. Fighting the contract can be done. It is very likely, though, that the veterinary group has significantly more financial resources to pursue enforcement and appeals than Dr. A.

 

Dr. Allen is a partner in Associates in Veterinary Law, P.C., a law practice specializing in business and legal counsel for veterinarians and their families. He can be reached at www.veterinary-law.com or call (607) 648-6113.