Pandemic Salary Reductions
My Employer Suddenly Wants To Reduce My Salary Due To The Pandemic. Is That Allowed Under My Contract?
We have received many calls from our physician clients in the midst of the COVID-19 pandemic. The calls mainly relate to issues about their employment agreements. The pandemic has had a significant effect on the economy, has forced practices to downsize and reduce expenses while retaining the employed physician, at least on a temporary basis. The question arises: Is this legally allowed?
Most employment contracts contain language stating they can only be changed by a mutually agreed upon written amendment which must be signed by both parties. Therefore, an employer cannot unilaterally amend an employment contract without your consent if the language in your contract requires a written amendment. Even if this is the case, in thinking about what to do you should also consider whether your contract has an early termination provision allowing either party to terminate the contract without cause upon notice. “Without cause” means for any reason or no reason. Usually the “notice” period ranges in the number of days (e.g. 60 or 90). If you and your employer cannot agree on an amendment, the employer may resort to early termination as an alternative.
Agree to a temporary amendment. If you do this you should have the amendment state how long it will be in effect. Stating “until the pandemic ends” or language to that effect is too vague and too subjective. A better way would be to state the start and end dates for the amendment. You can always re-evaluate and move ahead upon further mutual agreement but using specific dates will avoid allowing your employer to continue the agreement as amended indefinitely.
Do not agree to an amendment and proceed to legally enforce contractual rights in which case the employer can likely still terminate without cause upon notice.
Do not agree to an amendment and risk early termination without cause. If this is used by the employer you will still need to work during the notice period; however, if you are not allowed to work you will likely be entitled to compensation during the notice period depending upon the language in the contract.
Terminate the contract yourself by using the early termination provision. If you do this you will need to work during the notice period; however, if you are not allowed to work you will likely be entitled to compensation during the notice period, depending upon the language in the contract.
Think through the consequences of any termination. Is there a restrictive covenant (non-compete) in the contract? Be prepared for it to be enforced by the employer especially if you terminate without cause.
Are you responsible for tail insurance coverage post-termination of the contract? If so, what does that mean in terms of cost for you?
From a business perspective, how important is it for you to stay in a position until you have another? This is most often the case, especially for new physicians and/or those who are in specialties that are not in frequent demand.
If you and/or your employer decide to part ways, you should consult with your attorney about how notice should be provided and what other agreements should be considered (e.g. a Separation Agreement that contains certain provisions, such as a non-disparagement agreement).
The above is only one example of the type of issues arising out of the COVID-19 pandemic. Each contract must be analyzed individually. We cannot cover all of the legal issues in one newsletter nor can we anticipate all of them; however, the above is intended to offer some insight.
Please Contact Us if we may be of assistance.
Articles distributed by Malecki & Brooks Law Group, LLC are advertisements and summaries for general information and discussion purposes only. They are not full analyses of the matters presented, legal, or otherwise, and may not be relied upon as legal advice.
> BACK TO ARTICLES