Employment Contract Provisions Dentists Must Review Before Signing

Oct 5, 2020

This comprehensive blog by Al Anthony Mercado, Esq., of Fager, Amsler, Kelly & Schoppmann, LLP, will clue you into what to look for when reviewing and signing employment contracts.

The devil is in the details!

Caveat Emptor. Buyer Beware. When it comes to employment contracts, always be cautious and make sure you comprehend the whole document before you sign. What you don’t know can hurt you, and what you think you understand can hurt you even more. Be sure to research prospective employers using the internet and review websites. Remember that verbal agreements, understandings and promises are not worth the paper they’re written on — it is vitally important to incorporate agreements into writing and understand all contract terms and their impact on your employment.

Types of Employment

A traditional private practice is a dental practice that can have one or more locations. Benefits include autonomy, potential ownership, control of schedule, patient care and treatment. Cons include administrative time and costs, as well as regulatory compliance.

Corporate Dentistry (Dental Servicing Organization “DSO”): anywhere between two and a hundred offices that share the management of the non-clinical aspects of operating a dental office. Benefits include less administrative duties and less time managing a dental practice, more time practicing dentistry, part-time opportunities, no need to worry about regulatory compliance and work-life balance. Cons Include less autonomy over schedule and treatment of patients, marketing services and potentially less money long term.

Contract Provisions

There are several important contract provisions that every dentist needs to become familiar with before signing a contract:

• Employee vs. Independent Contractor
• Duties and Responsibilities
• Restrictive Covenants
• Compensation
• Scheduling
• Term and Termination
• Liability Insurance
• Indemnification
• Benefits/Vacation/Time Off

Employee or Independent Contractor

The distinction comes down to “control” and “taxes.”

An employee follows the direction and is under the supervision as to what, when and how work is to be performed. The employer maintains control over the professional services (the when and how). In addition, the employer withholds payroll taxes and may provide health insurance and other benefits.

An independent contractor is a self-employed professional who exercises independent judgment and renders services pursuant to the terms of a contract. The independent contractor maintains control over the means and methodology of the professional services. The scheduling however is set by the practice. In addition, the independent contractor maintains greater control over hours, fees, how work is performed, treatment and planning. Employers do not deduct payroll taxes and the independent contractors manage their own tax liabilities.

A dentist may prefer to be an employee if they:

• Desire a stable and predictable income
• Want less patient management and practice responsibility
• Would like to have benefits such as health and liability insurance

A dentist may prefer to be an independent contractor if they:

• Desire to manage their own tax liabilities
• Prefer control, like greater decision-making, self-management and autonomy
• Wish to use the opportunity to build their practice and skills without the financial overhead

Duties and Responsibilities

The provisions pertaining to duties and responsibilities must be reviewed carefully, discussed and fully understood. These provisions will establish two basic requirements:

• Technical: maintaining a valid license, continuing education, specialty training, HIPAA compliance training, etc.
• Practice: work hours, call, production, collection responsibilities and administrative duties.

The failure to meet these requirements can constitute a breach of the contract and result in termination.

Restrictive Covenants (non-competition clauses)

Restrictive Covenants pertain not only to non-competition within a certain geographic radius, but also patient and referral lists, non-solicitation of patients (and staff and contractors), referral sources, all for a specified period of time. Such provisions are unique to each location and can have a profound impact on a dentist after termination of the relationship.

Key elements to consider include:

• Geographic scope: Besides the actual radius in the terms does it apply to the multiple practice locations? What does the contract say with regard to locations opened after the contract is signed?
• Duration: How long does this provision last?
• Violations: What does the provision say about violations of this provision?
• Enforceability: Courts will use a reasonable standard to weigh the employer’s legitimate interest to protect the practice versus the geographic radius and duration. These decisions are fact sensitive and the laws vary from state to state.

Compensation

Compensation can take several basic forms and be defined in several ways in a dental associate employment contract:

• Salary
• Production: Gross or Adjusted
• Collection
• Bonus

Scheduling

Scheduling provisions are often ignored or overlooked during the review and negotiation process.

• The contract should specify days, times and location of work.
• Patient traffic, staffing, location and demographics can impact production, which in turn impacts compensation.
• The location also impacts post-employment restrictive covenants.

Term and Termination

• Term: How long will the employment relationship last? Some employment contracts have automatic renewal provisions while others are indefinite (continue until terminated pursuant to the terms of the contract).
• Termination: The contract should provide for the manner in which the contract is terminated by the parties. This can be with or without cause.

Liability Insurance

Professional Liability Insurance is often ignored or overlooked in dental associate contracts. The contract should specify:

• Who is responsible for purchasing liability insurance?
• Is the liability insurance being purchased from a financially strong insurance company?
• The type of liability policy (claims made vs. occurrence)
• The limits of the liability policy and additional insureds
• In the post-employment period, who will maintain the policy (i.e. tail coverage)?
• Consent to settle

Benefits

Benefits are an important part of the total compensation package. These can include:

• Health benefits
• Retirement benefits
• Vacation/Time off
• Continuing education

In summary, use your due diligence to investigate prospective employers and decide which employment model is best for you. Be aware of the provisions that will impact you most and focus on the details. Ensure that the contract provisions reflect the terms that you agreed upon.

If you would like to read other information for dentists, visit our resources page. Policyholders also have access to MLMIC’s toll free 24/7 Legal Hotline: (855) FAKS-LAW (1-855-325-7529). Our experts are available to help you address any challenges that may arise.