I just finished doing some presentations at U of T and Western for the dental grads. I’m surprised by what graduating dental students know and don’t know. So I figured I would take some time here to tackle the top 10 issues that I routinely talk about. So let’s go…
1. You Need to Sign a Contract Before Associating!
Actually, you don’t. Verbal agreements are just as enforceable as written ones (though written ones are better / easier to turn to in the event of a dispute). And it’s better for an Associate to not sign. Why? Because then you’re not tied down as much with respect to things like non-competes and non-solicits. You may not get a job, however, if you don’t sign.
2. Associates Make 40%
True, for most places in and around the GTA. If you go up north, it’s hard for principals to find associates to work, so they pay them more (upwards of 50% is not uncommon to hear of).
3. 40% of Billings
Actually, no. It’s 40% of collections. There’s a big difference here. Make sure to pay attention to this little (but important) distinction in the contract.
4. Option to Purchase
Only in the rarest of situations will a new grad have the option to purchase a dental practice/building that houses the dental practice. That’s because they don’t have real leverage over long-term associates, the relationship isn’t there, and it’s a seller’s market (so why would a seller want to tie themselves in contractually)?
5. Employee vs. Independent Contractor
Virtually every associate agreement I’ve seen portrays the Associate as an independent contractor and NOT an employee. This distinction is very important. There are risks to both the Associate and the principal if it turns out that the reality of the relationship does not, overall, constitute a true independent contractor/client relationship. There are things an Associate can do to make themselves look more like an independent business – such as having their own instruments, determining their own schedule, owning their own patient records, having a dentistry professional corporation, marketing, etc. No one factor will be final; legal decision-makers will look at the totality of the relationship. For further information about this important topic, I’d suggest you read the Chapter in our eBook (chapter 1) that discusses (mis)characterizing the relationship and the negative consequences that can result for all parties (denial of tax benefits; denial of employment standards benefits, etc.).
6. Legality / Enforceability of Non-Competes and Non-Solicits
7. Termination Provisions
If your associate agreement doesn’t contain a termination provision, you may be in trouble if you try to terminate before the end of the term. For example, if you have a 2-year term and then leave on day 1, you’ve violated the agreement and the principal can ask for the amount of money they would have received had you actually stayed for the full 2 years! These are called expectation damages. The principal will have a duty to mitigate their damages. But that’s beside the point: you should definitely build in some termination provisions – such that either side can terminate by providing the other with some minimum notice. The amount of notice is negotiable but typically ranges from 1-2 weeks to 1-3 months.
8. Penalty Clauses
Courts won’t generally uphold straight up penalty clauses in these types of contracts. But they will enforce a clause in a contract that says that if the Associate breaks the contract, the genuine pre-estimated damages that the principal will suffer will be $x (that number is negotiable, but we’ve seen some pretty large numbers here, like $100k!!!). If I were negotiating on behalf of the associate, I’d get these clauses out of the contract and just let the damages be whatever the principal can prove they are. And there should be a duty on the principal to mitigate their damages too!
9. Can I negotiate?
If you don’t ask, you won’t get it.
10. Who will review my agreement in case I need help?
DMC LLP has lawyers devoted exclusively to reviewing/negotiating associate agreements. Call us today to get an education and a quote.
Please note that the information provided herein is not legal advice and is being provided for educational purposes only. If you require legal advice or representation, contact DMC LLP today!