I know I’ve written a lot about Associate Agreements for Dentists. But I still think it’s important to hammer home the message. What kinds of things should dentists on both sides of the table be worried about when drafting, negotiating, and entering into Associate Agreements? Let’s look at some nuances, shall we?
What are the parties?
Who will be hiring the associate? A dentist or their dentistry professional corporation? To avoid conflicts of interest, a dentist cannot work for a non-dentist. Be sure to spell out who the parties are, using their full legal names.
I’ve talked about this quite extensively. Are the parties independent businesses (whereby the dentist is a client engaging another dentist to provide services?) or is the relationship one of employer and employee? There are important tax and termination provision that arise if the associate is deemed at law to be an employee (irrespective of whether the agreement says that the associate is an independent contractor). So watch out! If you want to have a truly independent relationship, you need to set it up that way; saying so in an agreement won’t make it legally stick!
Typically, employees are hired on for indefinite terms while independent contractors are hired for a set period of time (e.g. 6 months, 1 to 2 years). Can the agreement be automatically renewed or is notice required to be provided?
How will the parties be able to terminate their relationship? By agreement? By giving notice? Through “just cause” (i.e. where the associate or the dentist have done something wrong to deserve termination)? What obligations – financial or otherwise – will the associate and the dentist have to one another upon termination?
Tools and Equipment
Who will be providing the dental tools, equipment, supplies, etc. for the associate to provide services? If the associate is an employee, the dentist employer will typically provide such things. If the associate is an independent contractor, they sometimes provide their own tools to do the job.
Will the associate be paid a percentage (industry standard: 40%) of billings or of collections? Dentists typically prefer the latter: when they get paid, the associates will get paid. When and how will payment be made? What deductions are made to payments (e.g. lab fees)?
Restrictive covenants are clauses that ask the associate to not do something they would otherwise be able to do – such as compete with the business of the dental practice or solicit the patients, employees, or referring dentists of the dental practice. I’ve written a lot about restrictive covenants, which you can read here. Be sure to speak with a dental lawyer about the enforceability, language, clarity, etc. of these clauses. Also, be sure to watch our presentation to the 4th year students about restrictive covenants.
Confidential Information (e.g. Dental Records)
Will the associate be provided with confidential information? If so, how is that confidential information to be defined (e.g. dental records, patient charts, x-rays, models, sensitive business information about the dental practice, etc.). Who owns the confidential information at all times (presumably, the dentist – but this should be stated somewhere). What obligations does the associate have when dealing with or using the confidential information? What if the associate discloses, uses, or loses the confidential information inappropriately? What rights and obligations will the associate have to the dentist in those situations?
Rendering Services to Family and Friends
Will the associate be able to render services for free to immediately family and friends?