Breaking the Contract: The Effect on the Agency

The following is a Guest Contribution by: Cynthia S. Kinnas, Special Projects Consultant, Randstad Healthcare

What Happens When a Traveler Breaks a Contract/Verbal Contract?

Demand for travelers remains at peak levels – there are many agencies and tons of enticing assignments available nationwide — hurray! However, with that, traveler cancellations are also on the rise. This is at least partly due to the fact that travelers are being bombarded with numerous opportunities and often hear about an “amazing assignment” shortly after accepting one, and also because there is less fear of burning a bridge since jobs and employers are in such a plentiful supply. Hospitals cancel assignments as well, and if it has happened to you, you know how dreadful the experience is. However, traveler-initiated cancellations outnumber hospital cancellations five to one and are something the traveler has control over, hence this will be the particular focus of this particular article.

When reading articles or blogs about “How to Break a Travel Contract”, most seem to revolve solely on how the traveler can break a contract without incurring financial penalties. Though this is a legitimate concern, the reality is that in most cases, travelers do not incur financial penalties after breaking a contract, nor are they sued by their agency; however, that does not mean there are no other unfavorable consequences.  I would like to take you behind the scenes for an inside look at exactly happens once you accept a job offer and what happens if you later cancel it.

What Happens once you Verbally Accept a Contract

Because the traveling healthcare industry is based on mutual trust, and speed is always of the essence, the wheels quickly go into motion once a verbal offer is accepted, and for this reason, verbal agreements are legally binding. This means there is really no difference if you break a contract before or after you sign the written document because once you have verbally accepted an assignment, the following things occur:

1. The hospital is notified immediately of your acceptance, and as a result, they then decline any other pending candidates for the position. They also cease any and all recruiting efforts for it, including calling all agencies off the search.
2. Various departments at your agency get to work. A credentialing team reviews your file and matches it against the client contract to determine which required documents you may need in order to comply with your assignment. Calls are made, labs scheduled, criminal background checks initiated, etc.
3. Your contract is drafted by an Admin team, proofread by other departments, and then sent to you.
4. The Housing department makes note of your requests and then starts a search for your apartment (unless you are taking a stipend).  After the search and reference calls, they execute the lease, set up all the utilities, rent your furniture and schedule its delivery.  They also send off thousands of dollars in security deposits, rent, and other fees in order to lock down your housing.
5. After tracking all the documents, the credentialing team prepares a pre-employment packet, including your license, physical and lab work, and sends it to the hospital.
6. The hospital adds you to their schedule.
7. The benefits department at your agency registers your eligibility for any applicable benefits.
8. The payroll department at your agency sets you up in the computer system for payroll.

What Happens if You Break a Contract (even a Verbal One?)

If you cancel an assignment, especially with little notice, you will leave a “wake” that you probably did not intend. Broken contracts impact agencies, as you might expect, but they also impact our nation’s hospitals, patient care delivery, your traveling colleagues, and even your own career. Once you consider everything at stake, and all the people affected, you will see why canceling a contract should only occur if you have a true and unavoidable emergency or if the actual assignment differs greatly from the terms you agreed to in the contract and significant issues you cannot live with cannot be resolved by your agency and/or the hospital.

Impact on Your Agency

• Immediately after you accept an offer, your agency typically secures housing for you and pays a large deposit and the first month’s rent, as well as furniture rental and utility deposits. The Agency usually occurs housing-related losses of $1000 to $3000 for each canceled (or early termination) contract.  This is because most landlords required a 30 to 60-day notice, yet job offers and certainly cancellations typically occur much closer to the move-in date.
• Because cancellation rates have been increasing, many clients have instituted a cancellation penalty which they will charge the agency if their travelers cancel without a certain period of notice (usually at least 2 weeks). These can be several thousand dollars per canceled contract.
• Because the agency cannot bill the client for a canceled assignment, this means the agency is not paid for the labor they invested in finding your housing, assisting with tracking and collecting your required documents or state licensure, or marketing costs associated with finding your jobs and new client hospitals.
• Most recruiters work on commission, which is not “gravy” or a “bonus”—it’s typically an integral and routine part of their compensation and can make up 40% or more of their wages.  Without commission, many would not be at a livable wage. The commission is paid to the recruiter when you are actively working, and the agency is billing the hospital. This means when you cancel an assignment, the recruiter is not paid (or not paid in full) for the time they spent securing the assignment for you.

It is possible the first 2 items (housing costs, client penalties) may be passed onto you, which is understandably a frightening thought. However, if they are not, this means the agency must absorb these financial losses. Because cancellations are on the rise, most agencies have had to set aside funds for “canceled assignment losses” as a budgeted overhead item.

Impact on Your Traveling Colleagues

• Other travelers working at the hospital where you canceled are often asked to change shifts or days off in order to accommodate your absence.
• The ability of the agency to offer future travelers the most competitive pay packages is directly affected by the financial losses the agency absorbs when an assignment is canceled. Essentially a portion of the billing to hospitals has to be allocated toward the “overhead” of canceled assignment losses. It would certainly be ideal if this money could be redirected toward traveler paychecks instead.
• Financial losses aside, broken contracts are simply not good for the travel industry. Travelers are professionals who are contracted to provide relief as a reliable solution to the chronic staffing shortage. Canceling a booked assignment, especially at the last minute, goes against this promise and discredits the traveling profession.  Hospitals that have experienced multiple cancellations may look poorly for travelers overall as they may feel they cannot count on them. Some have even stopped using travelers altogether as a result. This affects the reception and experience all travelers have and also means fewer assignment choices when hospitals shy away from using travelers.

Impact on Hospitals and Patient Care Delivery

• If you cancel your contract, especially at the last minute, the hospital typically has no other option to fill your position. The other “runner-up” candidates they had are likely now booked elsewhere, and because they have not been recruiting; they will likely not have anyone else waiting in the wings to backfill your position. They have to do things like scramble to fill the position and/or ask their staff to do mandatory overtime until relief arrives.
• Broken contracts absolutely negatively impact patient care delivery. A staffing crisis is never good for the patients. It can even lead to closed units for a period of time. The worst case I observed due to a cancellation was a small hospital actually having to divert its patients to a different facility as they did not have the required number of nurses.

Impact on Your Career

• It is likely you will not be eligible for rehire at the facility where you canceled an assignment. By confirming the assignment initially, you selected that facility and location for a reason, so it’s a shame to limit your ability to work there in the future.
• Largely due to healthcare reform, mergers and acquisitions of hospitals are on the rise and are projected to continue at unprecedented rates.  This means you risk not only be marked as not eligible for rehire at the specific facility where you canceled but at every facility in their network.
• MSPs and VMSs continue to penetrate travel staffing. Most MSPs and VMSs represent numerous facilities across the country and have centralized oversight. This means you could end up not eligible for rehire by an MSP or VMS at a large number of their client facilities.

Tips to Avoid Breaking the Contract

Do all your “shopping” before you commit (even verbally) to an assignment. Once you have accepted, do not continue to entertain other job opportunities that would conflict with the timeline to which you committed.

Ask for time to think it over if you need it before officially confirming an assignment job offer.  Most facilities will give you 24 – 48 hours before you have to give an answer. You may need this time, especially if you have to make arrangements in order to take the assignment (such as school or childcare for children, a leave of absence from a perm job, the care of a sick relative, etc.).

If you get a call about an amazing opportunity after you have accepted something else, ask the interviewer or agency how frequently this assignment opens up and the likelihood of you being able to do it for your next contract. Reputable facilities and recruiters will respect the professional commitment you have already made, and they may try to work with your timeline.

If you receive your written contract (or arrive at the facility) and key details (i.e.: shift, hourly rate, assignment start date) are quite different than what you verbally agreed to, take the following steps. Contact the agency to determine if there was an error in drafting the contract. If not, itemize the issue(s) in question that you cannot live with. Allow the agency time to communicate with the client hospital if needed. If the issue(s) are not resolved, ask to speak to a manager (and work up the chain of command as needed) in order to rectify the situation. If it cannot be rectified, or some satisfactory compromise is reached (i.e.: higher pay for working a different shift), ask that you be “released from the contract without penalty” and that this release be put in writing (or email).  You may also want to consider calling the hiring manager at the hospital to explain the circumstances around your cancellation as well.

Always maintain a good professional relationship with your agency. This is important as it will build your credibility in case there is ever a trouble and you have a legitimate problem with following through on a confirmed contract. 

What if you Really Have to Break a Contract?

Of course, aside from contract discrepancies/disputes, there are legitimate, unforeseen, and unavoidable personal reasons you may need to break a contract. This would include major health issues or family emergencies. If something like this happens, take the following steps to ensure the best possible outcome for yourself, your agency, as well as the hospital, and its patients.

1. Communicate early and openly with your agency. The more notice the agency has on a pending problem before the assignment starts, the better. The most drastic consequences listed above occur when very little notice is given.
2. Ask your agency if there are any alternatives to canceling the contract. For example, could you delay the start date or work a different shift, etc.?)
3. If canceling is the only option, follow the protocol your agency outlines. (i.e., who is to notify the hospital – you or your agency, etc.)
4. Offer referrals of other professionals who might be able to replace you if you can.
5. As a professional courtesy, when you are able to work on an assignment again, do your best to accept one with the agency (and even the client) where you had to cancel.

The good news is, not only will the process be smoother if you follow these steps, but it is also extremely rare that a fee will be assessed by the hospital or your agency in cases of a true and legitimate emergency.

Summary

Everyone involved plays a role in upholding the highest standards in the travel industry. Most travelers are highly skilled, flexible, and dedicated professionals who are very committed to great patient care, even in tough circumstances. With more awareness about all the factors involved, ideally, you can see that it is possible to operate in a way that maximizes your options and takes advantage of all the super opportunities while being able to follow through with all your professional commitments at the same time.

Written By:
Cynthia S. Kinnas
Special Projects Consultant, Randstad Healthcare
TEG Committee Member