Associate agreements

March 21, 2012

You’ve found the right associate to work in the practice and to assist in its growth. There are many issues to be settled to ensure that the associate has accepted the parameters of the job description reflective of the compensation, benefits and responsibilities agreed upon. To protect the owner and the associate, these points should be in writing and executed by the parties so when questions arise, the agreement can be reviewed and answers found without the necessity for litigation because of the vague nature of a contract.

You’ve found the right associate to work in the practice and to assist in its growth. There are many issues to be settled to ensure that the associate has accepted the parameters of the job description reflective of the compensation, benefits and responsibilities agreed upon. To protect the owner and the associate, these points should be in writing and executed by the parties so when questions arise, the agreement can be reviewed and answers found without the necessity for litigation because of the vague nature of a contract. Those dentists experienced with associates know how easily a situation can deteriorate and how important a properly prepared written contract can be.

Get it in writing

How many dentists don’t even have a written contract with their associate? One of the first duties of a consultant charged with the responsibility of stabilizing a dental practice is to advise that all verbal understandings go into a written format that is to be executed by the owner and the associate. This may not be easy if the associate has been with the practice for some time without a written contract. What is the associate’s incentive to sign now, especially if some financial points described within the contract that have been loosely followed on a verbal basis? Let’s first describe the length of an employment contract. Will the dentist go to a friend who is a general attorney, without experience in dental contracts, and ask for an employment agreement to be crafted? These are typically one or two page agreements without any substance. A good associate employment agreement will probably encompass about twenty to twenty five pages if prepared by someone with experience in writing such contracts.

Terms and conditions

Here are some of the main terms and conditions you should address prior to entering into an agreement:

1. Engagement and Status. An often debated issue is whether the associate is an employee or independent contractor. It is next to impossible to prevail against the IRS, let alone any state taxing authority, regarding the issue of employee versus independent contractor. To save yourself an enormous bill defending an extremely weak position, hire the associate as an employee. Representations and warranties as to licenses, certificates and regulatory approvals needed to practice must be acknowledged by the associate.

2. What term will the contract be? It can be year to year, as an example. The time commitments provided by the associate should be clearly stated, such as forty hours per week. There should be a full commitment by the associate to the practice only for the employer, unless otherwise acknowledged within the agreement.

3. Compensation and expense reimbursements should be as detailed as possible as well as the pay period such as weekly, bi-weekly, or any other period. Since the associate is just beginning, some fixed salary should be agreed to by the owner for a three to six month period until the dentist sees what the production of the associate becomes. At that point, a percentage of the collected production achieved by the associate with a subtraction of an agreed lab charge would be used to determine the associate’s compensation.

4. Continuing education, business cards, and professional liability insurance reimbursement should be part of the employment agreement. Dues for professional societies, marketing expenses and entertaining referral sources should also be addressed to avoid potential questions that could lead to litigation because of vague wording.

5. Vacations, holidays, sick days and other leaves of absence are additional matters for inclusion in the associate agreement.

6. The obligations of the associate and the employer must be stated clearly. The associate should adhere to all administrative policies of the employer, comply with fee schedules, act in a professional manner, follow time schedules, keep accurate work records, use only dental labs and suppliers approved by the employer and promote the practice. The associate’s license must be maintained and all professional continuing education courses must be taken to comply with professional guidelines.

7. The employer must provide the associate with the necessary facilities, equipment, supplies and administrative support so the associate can provide excellent professional care.

8. There should be clauses for termination without and for cause. Each of these clauses has areas to consider so there is no misunderstanding as to a material violation.

9. Full disclosure in the event of death or disability assists in prevention of a law suit.

10. Employee and employer rights to patient information, other employee information, non competition and solicitation before or after termination are material items for discussion in the contract. These are some of the main areas of contention and cost causing litigation. These clauses should be prepared with special care. An experienced preparer of documents can include a provision for penalty in the event of the breach of these non competition and solicitation clauses such as a $350 for each patient transferring to the associate in the event the associate leaves the practice. A charge for soliciting a hygienist, front desk person or dental assistant can be agreed upon within the associate agreement to prevent the need for expensive litigation if these occurrences should take place.

11. A time frame can be agreed upon for the associate to have the right to a buy out of his or her contract. This allows the associate a way out of the contract without the need for litigation and provides the employer payment for the years of training the associate.

12. Also, a clause allowing the associate to buy into the practice in the future based upon terms established by formula, providing an exit strategy for the owner and an acquisition of the known, rather than unknown for the associate can be included in the agreement.

Preventing lawsuits

Meet with an expert with knowledge in drafting associate agreements if you are the associate or the owner of the practice. Dentistry is not like engineering, law, accounting or any other profession regarding contract language. Go with experience. It will assist in preventing litigation and strengthen the practice for the associate and the owner.

 

About the author

Bruce Bryen is a partner in The Snyder Group and managing partner for Bryen & Bryen LLP, Certified Public Accountants. Based in New Jersey, Mr. Bryen specializes in deferred compensation such as retirement plans, income and estate tax planning, the determination of the proper organizational format, asset protection and structuring loan packages for presentation to financial institutions. Bruce is also experienced in providing litigation support services and has testified on numerous occasions as an expert witness. Contact him at 800-988-5674, ext. 112.