When it comes to associate agreements, one of the most important terms revolves around getting paid. Typically, in the dental industry, an associate will have to fee-split with the dentist on a 40/60 basis. Here’s how it typically works. First, the associates provide dental services to a patient. Then the patient is charged. When the fees are collected from the patient or their insurance company, a few things are deducted (notably, lab fees, exam fees, bad debts, product expenses, dental hygiene fees, etc.). After this net amount is determined, then the associate will get 40% of that amount. Here are some things to keep in mind.
When
Typically, the dentist will want to pay out the associate on a monthly basis. This is done because the third-party invoices (e.g. lab fees) may take some time to figure out.
How
Payment is typically made by cheque or direct deposit. In the latter case, the associate will need to provide the dentist with a blank cheque (which contains the branch, transit, and account number for the associate’s bank account).
Invoice
If the associate is an independent contractor providing services to a dentist’s patients, then the associate should provide the dentist with an invoice. The invoice should be provided within a specified period of time. It should also be in form and substance which is satisfactory to the dentist.
Withholding
Something that my law partner, David Mayzel, and I thought about when drafting an associate agreement was this whole idea of withholding. Basically, if the associate causes damage to the office, dental equipment, or performs services that are in need of repair or correction (which will typically by the dentist), then the dentist should be able to recover these fees from the associate. A relatively easy way to guarantee that the dentist gets these fees is through the use of a withholding clause: a certain percentage of the payment to be made to the associate will be withheld by the dentist in trust until an aggregate amount is reached (e.g. a few thousand dollars). This will continue on during the term of the associate agreement. If the dentist, in their discretion, needs to use some of this money (e.g. pay themselves based on normal rates to correct the associate’s work), then they can do so. If at the end of the term of the agreement, there is some withholding amount that hasn’t been applied, then the dentist will return that amount to the associate.
Signing Over Payment
If for whatever reason, the associate receives fees from clients (e.g. cheque, direct deposit, etc.), then the associate agreement should contemplate that such fees will be transferred over (i.e. endorsed in favour of) the dentist. The whole idea is that the dentist holds the fees collected for the associate in trust and disburses those fees according to a set formula (described above).
