The main purposes of employment agreements with your associate dentists are to ensure that everyone in the employment relationship understands their rights and obligations and to protect your dental practice from unnecessary competition and potential legal issues. If we set expectations early and place them in writing, we avoid most—not all—controversies. 

Important Employment Agreement Provisions 

Thus, an employment agreement between a dental practice and an associate dentist must set forth the basics of the employment relationship. Basic terms that should comprise every agreement and that both dentists should consider include:

1.  Whether or not the associate is an employee or independent contractor 

There are very rare instances where an employing dentist may treat an associate as an independent contractor.  Generally, if the employing dentist and the employing dentist’s attorney/accountant are following the law, the employing dentist must treat the associate as an employee. 

Nardone Limited Comment:  Nardone Limited will be drafting an article on this specific issue in a later publication.

2.  The Term

The employment agreement must contain an employment term, which is the timeframe for the employment. You must consider not only the initial term, but also any renewal terms, and how the agreement will be renewed.  For instance, will the employment term renew automatically, or require written consent?

 3.  Compensation

Next, an employment agreement should define the associate’s compensation in terms of amount and structure.  As many of you know, the terms of compensation are open to a variety of options, such as: (i) collections versus production; (ii) draws; (iii) flat fees; (iv) guaranteed minimum salaries; (v) profit centers; and (vi) bonuses. Most importantly, both parties must fully understand and believe that the terms of compensation are fair.

 4.  Fringe Benefits

These may include health insurance, CE, vacation and sick days, retirement, disability or life insurance, depending upon the overall deal and compensation.

5.  Duties and Responsibilities 

The agreement should clearly state the Practice’s expectations along with the associate’s duties and responsibilities, including a work schedule. Nardone Limited also recommends that the Practice list out its duties and responsibilities to the associate doctor as well.

6.  Restrictive Covenants

The agreement should include non-disclosure promises. The associate dentist will promise not to retain or disclose patient lists, referral source lists, practice forms, business and development plans, and computer information etc. Second, the associate doctor will agree not to solicit patients, employees, or referral sources.  Finally, the employee will agree not to compete in a geographical area for a certain period of time after termination of the agreement.

Nardone Limited Comment:  There is a lot of misconception out there as to this provision. Nardone Limited will be drafting a separate article on this in a later publication.

7.  Exit Strategy

As with many marriages, many associate relationships fail.  It is very common for an associate to discontinue working for you 6 months, a year, or two years later.  Thus, understanding how and when the agreement may be terminated is very important.

8.  Rework 

“Rework” means any follow-up treatment necessary to correct a material or work defect in Seller’s original treatment—other than normal wear and tear, decay, accident, or patient misconduct—whereby the Seller performed the original treatment within the one year period before the date the follow-up treatment became necessary. Such treatment should be addressed in terms of how the associate will repay the Practice for any rework, including during the term of the agreement and after termination. 

 9.  Malpractice Insurance 

Make sure it is clear who is responsible for obtaining it, maintaining it, and paying for it, as well as understanding the differences between tail coverage versus an occurrence policys.  These may include health insurance, CE, vacation and sick days, retirement, disability or life insurance, depending upon the overall deal and compensation.

10.  Anticipating Ownership

If the associate dentist has an interest in owning the dental practice, you should discuss ownership with the associate as early as possible. Your employment agreement can anticipate ownership by providing for options to acquire an interest in the dental practice. You may also define goals for your associate dentist to meet before the associate can
purchase an interest. Any option to purchase can set forth purchase price, terms of payment, and structure of the co-ownership.

In sum, the goal of an employment contract is to ensure that everything that the two parties have agreed to is in writing and is fully understood by the parties.  If you have controlled and understood the associate’s expectations, and have written down in the agreement everything that has been agreed upon, then the employment relationship is more
likely to work out.  There is a list of other provisions that we could certainly include in this article.  But, we simply do not have enough space.  Please see our dental blog for a more specific employment checklist that we have drafted and should be considered as part of negotiating an employment agreement.