What the New Dentist Should Know About Employment Contracts

What the New Dentist Should Know About Employment Contracts

Upon graduation, new dentists looking for employment in the private sector will encounter a situation with which they are not very well familiar or informed about…they will be asked to sign a contract. 

Now, many new dentists believe a contract may not be necessary or that it only serves to protect the employer. Nothing could be further from the truth. A contract can and should protect the employee as well as the employer. A signed agreement should be in place prior to any commencement of employment. In fact, I insist that every dentist should have a signed contract/agreement in place before starting a position. Without one, he or she may have no legal recourse if something were to go awry. 

And, the contract should contain anything and everything an employer and employee want addressed. Contracts must be treated like patient case notes—if it is not written down, it did not happen. The challenge for new dentists is to know what to look for in a contract and what should be included on their behalf.

As with many other practice management issues, the dental education experience all too often does not address employment contracts. In truth, graduating dental students are undereducated and unaware of what should be included in a contract. And, another fact is that many experienced owner dentists do not have much experience in developing contracts. What transpires is the presentation of a contract that is not thorough, legally enforceable, and may lead to extensive and expensive litigation which is in nobody’s interest. This article will discuss the terms and issues related to a contract that represents the best interests of the employer and the new dentist employee.

Terms and Conditions

One of the first issues that presents in a dental contract is either the term “Employee” or “Independent Contractor.” Either of these two words will most likely appear in the contract title or the very first sentence. The definition of an employee, according to Webster, is “one who works for another.” Independent is defined as “showing self-reliance or personal freedom.” From the definitions one can easily determine the very different meanings of the words. 

As an employee, you work for another person, i.e. the employer. The employer is the owner of the practice or business. If you work for the owner you are subject to the terms of an employment contract. However, as an employee, you are entitled to all the benefits offered to every other employee of the practice. These benefits may be health insurance, vacation pay, holiday pay, uniform allowance, continuing education reimbursement, retirement savings, etc. 

Independent connotes that you work for yourself. Therefore, an Independent Contractor would literally be a subcontractor in a dental practice. The dentist would subcontract their service to an existing practice that is owned and operated by another owner. Therefore, if a dentist is not an employee of the practice, he or she may and should not be bound to the same contractual terms as an employee. And, an independent contractor would not be eligible for benefits offered to employees. 

Now, there are benefits to being an independent contractor in the way of tax deductions. The problem is that in dental contracts these two terms are often represented as having the same meaning. Oftentimes independent contractor contracts are presented to dental associates with the expressed purpose of not having to offer benefits to the associate. But, these contracts also require the independent contractor to abide by the terms and restrictions of an employee. In simple terms, the employers may want it both ways and to their favor. 

Attorneys and dental CPAs will attest to the fact that if you work as an associate in an owner’s practice, your hours defined, your financial remuneration defined and calculated, abiding by the practice philosophy and are bound to a restrictive covenant not to compete, you are legally an employee. And as an employee, you are entitled to all the extended benefits of all employees of the practice including withholding federal and state taxes. 

If none of those terms or restrictions is evident, you are an independent contractor. In this case, an owner doctor may want to hire an associate as an independent contractor, but if he or she does not want to offer an employment position they will have to forfeit some of the restrictions placed on an employee. 

The dilemma for the associate dentist is whether to question the validity of the contract at the expense of not acquiring the position or placing themselves in an untenable position. The dilemma for the owner doctor is to fabricate a reasonable, thorough and legally enforceable contract or expose themselves to litigation or an inability to hire quality associate dentists. However, there is room for negotiation in these situations. Both parties may not be able to negotiate everything they want, but they may get more than they had in the original deal in terms of a fair and legal agreement. Compromise is the key to brokering a fair agreement.

The difficulty is most new dentists are so eager just to have a job they are fearful of questioning the contract proposal or initiating a dialogue of negotiation. The bottom line is that while attorneys and dental CPAs will recommend being an employee, it is the associating dentist who must do what is in his or her best interest. And in their best interest, an associate should seek professional advice in reviewing every contract before signing on the dotted line. Owner/doctors desiring to hire associates must also receive professional advice in devising a contract.

What Should Be In A Contract

The first thing to understand is that no two contracts are alike, especially dental contracts. Some are very lengthy and encompassing, and some are very short with a dearth of information. Remember, anything can be added to or subtracted from a contract, and “if it is not written down, it didn’t happen.” Therefore, both parties want every concerning issue addressed and included in the contract. 

Then, you want to have it reviewed by professional counselors. If the new dentist wishes to enter into an employee associateship agreement, the contract should specify the length of the contract, where you will work, and the owner’s expectations of employment. These issues will require abiding by the practice philosophy, adherence to the standards of practice and ethics of the state dental licensing authority, etc. 

Also stated will be the possession of all required professional licenses, dues and insurances mandated by the state licensing board. It will also address your duties to the practice such as patient treatment days and hours, on-call coverage and managerial responsibilities. Also included should be what the employee can expect from the employer such as equipment, materials, supplies and personnel necessary for optimum delivery of services, a means for settling disputes and cause for employment termination. The causes for termination must be specific and encompassing as to not allow for summary termination without cause. If there is a specific concern of the employee with regards to termination, he or she must include that concern or reason in the contract. In addition, the contract should contain a clause stating a time frame for notice of termination by either party, such as 30 days, 90 days, etc. Again, specificity in this area protects both parties.

Compensation

The next issue will relate as to how and when you are to be paid. This is extremely important because if anything goes wrong with your remuneration, your contract will be your only evidence for legal recourse and or judgment. The contract must specify how you will be paid: by salary, a percentage of your production, or a percentage of collections of your production. It should also specify which party is responsible for laboratory fees. Will the practice pay the lab fees or are the lab fees to be subtracted from the production or collection figure? What about remakes or redo procedures? Who has responsibility for those procedures and fees?

Now that you know how you are to be paid, when will you be paid? The contract must specify payment on a weekly, bi-weekly, or monthly basis. I would strongly recommend waiting no more than one time per month for payment. If you are eligible for individual production or team bonuses, the bonus policy must also be included in this section of the contract. Another issue that is not often addressed in these contracts is the issue of paid or requested personal leave policy. If this issue is important to you, and I feel it should be, then it must be present in the contract.

Benefits

Probably the most overlooked and undervalued aspect of an employment contract is the issue of employee benefits. As I stated before, if you are an employee of the practice, you are entitled to receive all the benefits offered to all other office employees such as hygienists, assistants and managers. Benefits packages vary from practice to practice. Some have extensive benefit packages, some sparse. 

Often, owner/doctors tend to treat associate doctors differently than other office employees when it comes to offering benefits. In other words, they do not offer benefits to associates as they do to other office employees. Why they feel there is a difference between associate employees and office personnel employees is mystifying. In truth, it is illegal to treat any employee of the practice different from another employee on this issue. The problem is that new dentists either are not aware of their legal rights as an employee or they do not want to challenge the employer on this issue. 

What can be some of the benefits offered? Health care insurance, professional liability and disability insurance, professional license and dues reimbursement, continuing education and clothing allowances, paid vacation time, paid holidays and personal days, retirement savings, profit sharing, bonuses, and other benefits may be offered as part of a benefit package. Some practices have all of these benefits and more. However, many practices have only a few. The real issue is whether an associate is going to challenge the premise that he or she is only an independent contractor when legally, they are an employee. The only way to know your situation is to consult with professionals in dental practice management, accounting and the dental law.

Restrictions

The remaining part of the contract will deal with issues such as confidentiality of patient and practice information and non-solicitation of patients or practice employees upon termination. These issues are basic to just about every dental associate contract. It must be stated that every practice owner reserves the right to keeping patient and practice information private. That is not only professional courtesy, it is common decency.

The one caveat to this section is that some contracts will contain a clause stating that if you leave the practice to associate in another dental practice and a patient follows you to that practice, the associate will be subject to financial penalties for treating that patient. I would caution any new dentist against agreeing to this clause, and if it is present, the associate should have it removed from the contract. My reasoning is simple. There is already a clause in the contract about non solicitation of patients. And the simple truth is that nobody owns a patient. Every patient has free will to seek dental services from whomever they choose. If you do not solicit a patient but the patient chooses to follow you to another practice, there is no legal reason for them to do so and no legal reason for you to be held accountable. However, the simple truth is that when leaving a practice, for any reason, an associate should not solicit any patient or employee. Ever!

Finally, one of the most contentious aspects of any dental contract is the restrictive covenant clause. It will state that if you leave the practice, for any reason, you quit, you are fired, or if the contract has ended and not renewed, you will be restricted from practicing dentistry within a specified distance from the practice for a specified length of time. These restrictions are so variable I could not even mention an appropriate distance or time. What I will say is that for this clause to be enforced, it must be reasonable. What must be considered is the associate’s ability to earn a living practicing dentistry if he or she is unreasonably restricted by time and distance from doing so.

For the owner/doctor, the question is whether an unreasonable restrictive covenant will prohibit the hiring of an associate? The only way to determine if it is reasonable and legally enforceable is to seek professional guidance as I have stated before. Even if the restrictive covenant is enforceable, I would recommend there be waiting period of 90 to 180 days before it takes effect. After all, how many patients can reasonably be expected to follow you to a practice after only 90 days? All this discussion pertains to an employee. Therefore, the question must be asked, if you are an independent contractor, does an owner/doctor legally have the right to restrict you from practicing anywhere you choose when you terminate from the practice? 

The last section that may or may not be present in a contract is one stating a method of settling disputes. Again this issue is so broad and variable professional advice is warranted.

Conclusion

Evaluating a dental contract can be a daunting and nerve-wracking task for a new dentist due to their lack of education and experience. Owner/dentists should desire a contract that not only protects their interests but is also attractive and appealing to a prospective associate. Because there are so many issues to be addressed, professional advice from practice management experts, accountants and attorneys is required to develop a thorough, reasonable and legally enforceable contract that represents the best interests of all parties.

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