Dental Associate Contracts

Intro: [00:00:02] Broadcasting from the Business RadioX Studios in Atlanta, it’s time for Dental Law Radio. Dental Law Radio is brought to you by Oberman Law Firm, a leading dental-centric law firm serving dental clients on a local, regional, and national basis. Now, here’s your host, Stuart Oberman.

Stuart Oberman: [00:00:25] Hello everyone and welcome to Dental Law Radio. We’re going to talk about something so near and dear to our hearts if you own a dental practice or if you are a general dentist working for a practice, dental associate contracts. I think what we’re going to discuss today can really apply whether you are a student in dental school – which I personally have the great honor of speaking at, and it’s amazing what the process is in dental school to get to that finish line – and whether you’re a small practice, large practice, whether you’re scaling, whether you have ten practices, 20 practices, one practice. Conceptually, it’s going to be all the same.

Stuart Oberman: [00:01:12] There’s a couple of points that, really, we could spend a whole day on this, but we only have a little bit of time. So, I’m going to touch on some highlights, especially some new regulatory matters regarding independent contractor status. So, the first thing we want to take a look at, you know, when you’re coming into a practice, what is your status, you’re hiring or you’re going into a practice as an employee or even a contractor, or you an associate dentist. One thing you got to consider is the Internal Revenue Service. Are you an independent contractor or are you an employee?

Stuart Oberman: [00:01:44] Now, I believe on some previous podcast, we talked about some regulatory matters regarding independent contractors and how everyone, State and Federal, is cracking down on that. So, again, it’s a key because, if you’re coming in as an employee, your contract will be totally different than if you’re an associate – I mean – excuse me – if you are independent contractor. We’re getting into tax issues. We’re getting into 1099 issues. So, I think we need to take a strong look at data as to what the relationship is. We see contracts that are actually geared towards independent contractor, but yet the wording is all of the contracts as employee, which is a disaster if you are a practice owner.

Stuart Oberman: [00:02:25] So, now, I think, number two – we want to look at a couple of things. Again, I could talk probably an hour on each topic here, but we want to drill this down to very specifics. So, you’ve got to look at your schedule locations. What are the number of days are you going to work? What dental office are you going to work at? If you work for a large group or if you own some practices, where are your associates going to work at? And then, what’s the work schedule? Is it weekdays, weekends, emergency calls? Who’s going to handle, you know, after hours? Who’s going to work on Fridays? Where are those Saturday and Sunday appointments coming in?

Stuart Oberman: [00:03:01] I think all these things are critical because if it’s not explained fully what the expectation is, as far as date, time, and locations, then you run into some issues regarding non-competes.

Stuart Oberman: [00:03:16] Now, we’re going to get into the benefit issues a little bit as to malpractice insurance. One, are you covered under your employer’s coverage? Two, if you are an independent contractor, do you have your own coverage? And then, if you have your own coverage, is it going to cover the practice that you are working in? So, I would never touch a patient with less than a million dollars in coverage. Never.

Stuart Oberman: [00:03:43] What are your deductibles? One thing that comes into play is that, on the risk management side, we will have to put out patient fires. And the first thing I’ll ask our doctors is, what is your deductible? So, if you turn in a malpractice claim – which is a whole another topic – and your deductible is 5,000 but you can resolve a case for 3,000, get it resolved. Do not turn in a malpractice claim. And if you do get it resolved – for goodness sakes – get a release signed before you issue a check.

Stuart Oberman: [00:04:22] So, now, we will look at item number four, duties of an owner and associate, what are their responsibilities? It should be specifically lined out what your responsibility is, what the owner’s responsibility is, staff, billing, collections. Let me say this as far as billing goes, I don’t care whether you work for yourself, own a practice, or you work for a group, or you work for a doctor that owns one practice, you are responsible for your own billing. If billing is fraudulent, if billing is incorrect, if billing is grossly overstated, you have bought that problem. You cannot delegate that problem to a staff member that you work with.

Stuart Oberman: [00:05:08] Next, number five, I would say, would be compensation, which is all over the map. If you’re going to work for a group, you’re going to be around 30, 31 percent. If you’re going to work for an owner, depending on what it is, relationship, you’re going to be around 35 to 40 percent collections. There’s a growing trend to do away with production. We haven’t seen that number in a while.

Stuart Oberman: [00:05:33] Are you working at a flat fee? Do you have a basis? Do you have an upside? Are you looking at 35 percent or the greater of that base pay? So, on a reconciliation, we run into a lot of problems on the associates side, where the doctors who own the practice or group are not reconciling on a monthly basis. If your last days at the end of the month, that should be reconciled, probably within five days, I would say. Sometimes, it’s going 30, 60 days on a reconciliation and that is never good because you don’t know where your numbers are at. So, again, compensation is a huge issue. That’s a whole another day topic.

Stuart Oberman: [00:06:18] But going up to number six, these are items that we see a lot that are excluded. And these are essentially what are the business related expenses. Who’s paying for your license fees? Who’s paying for your associate memberships? Automobile expenses? Are you a 1099? Are you an employee? What’s the entertainment? You’re going to be expected to bring in business.

Stuart Oberman: [00:06:46] Even on the dental side, marketing never stops. I would say that entertainment can be, you know, events. It could be fundraisers, promotional expenses, continuing education. I will tell you that a simple seminar for a general practitioner is a lot different than it is for an oral surgeon who’s doing implants. I think you need to have a defined number as to who is going to pay for the expenses and for how much. Malpractice insurance, are you going to pay that? Health insurance, who is going to be responsible for that? Disability and life insurance?

Stuart Oberman: [00:07:30] These are all basic things that should be absolutely listed in your expense portion of your contract. Again, the more you put in your contract, the less speculation, and the less you will have to call me down the road.

Stuart Oberman: [00:07:48] Charts, a question we get was, “Well, you know, I was with Dr. Smith for ten years and I have an established patient base. I look forward to taking those with me when I leave.” You’re absolutely wrong. Your patients do not go with you when you leave. Your patients will stay with the practice. That is a practice ownership.

Stuart Oberman: [00:08:07] Now, the question is, what do you advertise when you leave? How much do you advertise when you leave? Are you able to advertise when you leave? And if so, does that affect your non-compete? Those are all valid questions. It depends on your agreement.

Stuart Oberman: [00:08:20] We’re going to jump into another section, but one area you want to make sure you have access to is, if a malpractice claim is filed or a board complaint is filed when you leave that practice, you must have stipulated in your contract that you have access to those records to defend the lawsuit and to defend the board complaint. Rule of thumb is you take no charts with you, take no information with you. You take nothing with you except your instruments.

Stuart Oberman: [00:08:53] Number eight, noncompete. I get this question all the time, is my noncompete enforceable as a general rule? Yes. General rule, yes. Now, there are some states where that is not true. You’ve got to look at your specifics on each state. So, the question is, well, what’s fair and reasonable? It’s got to be geographically non- restrictive. It’s got to be fair, reasonable. I will tell you there’s some locations where a 60 mile noncompete is extremely reasonable, where a five mile noncompete is not.

Stuart Oberman: [00:09:31] I know on our contracts that we draft as a firm, we try to push the limit, honestly. I want a noncompete this 10 or 15 miles from my doctor, my owners. Now, when I’m on the other side of the fence and I get an associate, I want a three to five mile radius. So then, you get a question of is it air miles or is it as the crow flies, as we say? Or is it by Google Maps? That is a huge difference because sometimes a practice that you’re looking to buy or you’re looking to move to is within two blocks of your restriction. So, you’ve got to specify, is it air miles as the crow flies or is it a Google Drive Maps. Critical.

Stuart Oberman: [00:10:17] So, again, you want to look at the specific time period. What’s your time period on the noncompete? What’s your geographic area? Is it fair and reasonable? Again, depending on your location, two years, ten miles, maybe unreasonable. Depending on the practice that you’re at, three years, 30 miles, 50 miles, 60 miles may very well be reasonable. We have some clients that, for a variety of reasons, their patient base is 60 miles. So, if they have associates come in, we’re going to draft a 60 mile noncompete radius. Critical, critical, critical.

Stuart Oberman: [00:10:52] Again, going forward, number nine, confidentiality and trade secrets. All information in a practice is deemed confidential. For those practice owners, I would urge you to have every employee that you employ, including all independent contractors, including staff members, including associates, including hygienists, everyone signs a nondisclosure agreement. Everyone signs a nondisclosure agreement.

Stuart Oberman: [00:11:27] Trade secrets, I will tell you the first thing that will leave will be your patient base data. That is all ownership interest in the practice. That information belongs to the practice owner. Work for hire. That’s a whole different world as far as trade secrets go.

Stuart Oberman: [00:11:50] So, let’s take a look at retreatment, number ten. There are some dentists that are better than others. There are some that are a disaster. If you hire a disaster, what are you going to do when that doctor leaves and you have retreatment, redo, after retreatment, after redo for years to follow? Who is responsible for that? For the most part, you’re going to take care of that patient and you’re going to absorb that cost. But that can be thousands and thousands and thousands of dollars later. This is one of the reasons in our Asset Purchase Agreements on the buyer side, we put down the owners responsible for what they do prior to the sale.

Stuart Oberman: [00:12:43] So, let’s take a look at number 11 – and we get this question a lot – associates right to buy in. It’s amazing to me that when we talk to our dental students that are getting their first job, they have not even discussed this matter with the owner. They’ve not even met the team members, the staff members, they have absolutely no idea what the culture is in that practice and they already want to be an owner. They already want to be a buy in partner within a year.

Stuart Oberman: [00:13:19] My strong recommendation is that there is absolutely no discussion whatsoever upfront regarding a buy in. Unless that is a relationship that you’ve known that doctor for years, you have filled in every now and then. But there is nothing worse that will kill a good rollover relationship before you even step one foot into the practice or before you have one hand in someone’s mouth is ownership. If it is a good fit, it will take its course naturally. A lot of our associates are misled, “Well, you know, we’ll have you buy in for a couple of years.” That never happens, unfortunately.

Stuart Oberman: [00:14:06] So, I think you’ve got to gauge the relationship. Now, there’s nothing wrong in there of putting in a contract that you have the first right refusal should the doctor sell the practice. But I think is it a gross mistake to get in there and say, “I want in my contract valuations, buy in options. I want to know what your EBITDA is. I want to know what your numbers are. And I want to buy it within a year and here is the price.” I would throw that out the window and not worry about that.

Stuart Oberman: [00:14:35] So, you know, again, this is a very, very short segment on associate contracts. There are times, you know, we could speak on this for hours at a time. But I think if you look at what we’ve discussed in, you know, these 11 topics, I feel certain that you will take a look at your contract.

Stuart Oberman: [00:14:53] And let me say this about a contract, so do not get contracts off the internet. Do not use what your buddy did. Do not use what your brother-in-law did with his associates. It is ever evolving. Employment laws change. Circumstances change. An interesting part on our side, as a firm, we had dental clients probably in about 30 states or so. And we happen to see different trends, different things coming east, coming west, going north, going south. So, things change, wording changes, relationships change, laws change.

Stuart Oberman: [00:15:32] So, we see contracts that are used over and over and over for five to ten years. And those are absolutely a recipe for disaster, as I often say. So, do not go on the internet, do not download one, do not cut and paste one, because it is so different for each practice.

Stuart Oberman: [00:15:53] That is going to conclude our segment on dental associate contracts. And if you have any questions, any concerns, please feel free to give us a call, 770-886-2400, Oberman Law Firm. And if you want to email me, please feel free to email me, stuart, S-T-U-A-R-T, @obermanlaw.com. Thank you for joining our segment. And we’ll have much more to follow in future podcasts. Have a great day.