Many dentists, particularly doctors who have recently graduated from dental school, choose to become associates at larger practices, rather than open their own clinic or partner with another dentist. Structured correctly, this can be a mutually beneficial relationship, under which the owner-doctor can increase his or her practice’s client base, revenue, and profitability, while the associate doctor can gain more experience, both in providing direct patient care and in the practical operation and administration of a dental practice, which he or she can then use as a future practice owner.
Arizona law does not require that there be a written employment contract. However, if the agreement between the parties is either not documented or poorly documented, the parties can be setting themselves up for future disputes. This blog post will identify just a few areas where a well-drafted associate agreement can help avoid future conflicts.
Although compensation seems like it would be relatively straightforward, there can be a number of variables that can make it a complex issue. The following are some of the most common issues that can arise:
- If you are getting paid based on a percentage of your work, is your pay based on production or collections? A percentage that might be acceptable based on production, might not provide an adequate income if it is based on collections, especially if the office has a poor collection history.
- If you are paid based on production, is it gross production or net production, and how is the charge for each service determined? How “production” is defined and calculated can make a significant difference in the amount you earn.
- If you are paid based on collections, will you be allowed access to the books and records of the practice to verify the collection amounts?
- Will the employer offer a guaranteed minimum daily amount in the event the patient flow is not sufficient to keep you busy?
- What additional benefits are you receiving, on top of monetary compensation? You should know whether you can accrue any paid time off, whether CE and licensure costs are paid by the employer, and whether you are provided malpractice insurance, health insurance or life and disability insurance.
This is another area that, at first blush, would seem like it isn’t something that would need to be spelled out. After all, you are being hired as a dentist, so you may think that your duties begin and end with patient care. However, the employer may have different ideas, and may expect that you take more of a supervisory or managerial role over the staff. Although an employment agreement need not enumerate every duty the associate dentist is supposed to perform, here are a few of the issues that you and the employer will want to make sure to discuss before the associate starts:
- Will you have any authority to act on behalf of the practice in dealing with employees, patients or vendors?
- Will you have any management or supervisory responsibility, such as conducting performance reviews, leading meetings or disciplining employees? If so, will you be compensated any more for performing those responsibilities?
- Will you be able to set your own schedule, or will it be dictated to you by the employer?
- Will you be permitted to work in other offices, or does the employer expect 100% of your professional time and energy to be devoted to his or her practice, and will the employer try to place restrictions on your activities outside of the office? For example, we have seen associate contracts that prohibit an associate from engaging in any volunteer activity that the owner, in his sole discretion, considered to be incompatible with the owner’s business interests.
Finally, although it can be uncomfortable to think about just as you are starting your position, it is also important to be on the same page with the employer on how the employment relationship will end. The employment agreement should address:
- How much notice will be required to end employment? Typically, associate employment agreements will provide that either side may terminate the agreement upon providing a certain amount of notice to the other. Although this can vary, thirty days’ notice is the most common time frame we see.
- What will constitute termination for cause? The distinction between terminating for cause and without cause can be an important one. Termination for cause can mean that you forfeit accrued benefits, and possibly suffer other penalties as well under the employment agreement,
- Is there a restrictive covenant, like a non-compete or non-solicitation provision? Although there are limitations to the enforceability of restrictive covenants under Arizona law, the mere threat of litigation is often enough to dissuade doctors from violating the restrictive covenant. Therefore, you should consider how a restrictive covenant in an employment agreement may affect you after your employment ends. For example, if you are an associate at a practice in central Phoenix and have a ten-mile restrictive covenant radius, your options after employment could be quite limited, as a 10-mile radius would cover most of Scottsdale, Tempe, and Glendale. This map shows just how much of the Valley would be off-limits to you if you practiced in central Phoenix and had either a 5 or 10 mile restrictive covenant.
- Is there a mandatory arbitration provision or forum selection clause in the event of a legal dispute? As a general rule, arbitration provisions serve the employer much better than the employee. In a regular Superior Court case, you can have a full trial, with the opportunity to engage in extensive discovery, subpoena documents, and present questions to the jury. In arbitration, though, discovery is much more limited, and decisions are made by either a single arbitrator or a panel of arbitrators, usually lawyers, rather than a jury. If you are employed by an out of state company, the employment agreement might also contain a forum selection clause, which requires you to submit to either arbitration or a court proceeding in some other state, which can put you at a significant disadvantage if you have a dispute with your employer.
This isn’t intended to be an exhaustive list of the issues that can, and usually should, be discussed and documented in an associate employment agreement. However, these are the issues we see most often. If you are looking at starting a new associate position, and need help reviewing an employment contract, you should contact an experienced attorney to guide you through the process.