So in the next series of blogs, I’m going to be discussing life after dental school…that’s right: ASSOCIATESHIP.
After dental school, most dentists begin their careers working as an ASSOCIATE for an established dental clinic. An associate provides services in one of two ways:
- as an INDEPENDENT CONTRACTOR providing services for a CLIENT or
- as an EMPLOYEE providing services for an EMPLOYER.
Now, it‘s important to note that the Client or Employer need not be a dentist; indeed, a dentist may set up a corporation which in turn hires the associate as an independent contractor or employee. To keep things simple, the term Payor will be used in this series to refer to a Client or Employer who is paying the associate for their services.
Independent Contractor Associates Dentists
An associate carrying on business as an independent contractor is in business for themselves. While they are not employees of the Payor, neither do they own the dental practice. They typically sign a written agreement with a Payor to provide dental services. This agreement is very similar to what employees would sign, with a few important differences.
- They have greater autonomy than employees.
- They control how they provide services. They usually pick their own hours. They may work for multiple Payors. They are not integral to the Payor‘s business, but rather provide ancillary or complementary services to it. They own their own tools of production (e.g. dental tools, equipment, supplies, etc.).
- They earn business income.
- They can make a profit or incur losses. They are typically compensated based on a percentage of gross billings generated minus certain expenses (e.g. laboratory fees).
- They pay their own tax as a business.
- The Payor does not deduct, withhold, or remit income taxes, Canada Pension Plan (CPP) contributions, or Employment Insurance (EI) premiums in respect of the associate independent contractor. Rather, the associate files and remits their own income taxes and can deduct reasonable business expenses incurred to generate income.
- They have more liability.
- A Payor is typically not liable for the actions of an independent contractor.
- They have different termination options.
- The Payor and the independent contractor can terminate their relationship pursuant to the terms of the associate agreement (oral or written) they entered into.
Employee Associates Dentists
An associate who is an employee forms an integral part of the Payor‘s business. They differ from independent contractors in a number of important ways.
- They have significantly less autonomy.
- The Payor has much more control over the manner in which the employee associate provides services (in terms of supervision, discipline, and training). The associate employee receives a fixed salary and doesn‘t risk losing money in providing services. They do not work for anyone other than the Payor. Their schedules are typically determined by the Payor. They use the Payor’s tools and equipment. They provide the services personally and not through a corporation.
- They earn employment income.
- This imposes strict limits on what types of expenses they can deduct for income tax purposes.
- The Payor is required to deduct, withhold, and remit income taxes, CPP contributions and EI premiums on behalf of the associate employee.
- Their actions or omissions may lead to the Payor being vicariously liable for the harm resulting to third parties.
- They benefit from minimum standards legislation, such as the Employment Standards Act, 2000.
- That Act imposes minimum obligations on the payor with respect to things like maximum hours, minimum pay, minimum notice periods (for termination), vacation pay, maternity leave, etc. They also benefit from the common law (i.e. judge-made law) which requires the Payor to provide them with ―reasonable notice or payment in lieu thereof if the Payor wants to terminate the associate without cause (i.e. without the employee associate having done anything wrong).
In the next blog, I’ll be giving some good legal information to the dentists who will be hiring associates. Until then, if you need help drafting or revising employment agreements, or have questions about your contracts, we are here. We are happy to help and offer more information on these and any other employment issues. DMC is dedicated to helping dentists understand and minimize the risks associated with being an employer. Send us an email or give our Employment team a call directly at 416-443-9280 extension 206.
And for more information on recent changes, please refer to our Employment Law Changes & Updates section for the latest announcements in provincial and federal policies.