Written By Kevin Shea
If you get a job as an associate dentist you are typically confronted with a written Employment Agreement containing many confusing terms and conditions. Trying to decipher the meaning and context of an Employment Agreement can be just as confusing as a layman trying to read an x-ray.
The following are a few items you need to be aware of before you sign an Employment Agreement:
(PLEASE NOTE THESE ARE SIMPLY GENERALITIES IN WHICH TO LOOK FOR. YOU SHOULD ALWAYS CONSULT AN EMPLOYMENT LAW ATTORNEY FOR MORE SPECIFIC APPLICATIONS FOR YOUR PARTICULAR EMPLOYMENT AGREEMENT.)
- What is the Term of the Agreement? Most Employment Agreements have a “commencement date” and subsequently a “termination date” (or a method in which to terminate the employment). It is critical that you know the term since there may be certain applications of the Employment Agreement that do not begin until a commencement date and your Employment Agreement may terminate automatically which may negate certain duties, rights, and responsibilities even if your employment continues (e,g. your restrictive covenant-see below)
- How are your Compensation and Benefits Determined? Naturally this is a critical question, since your compensation is probably the most important component of the agreement. Some things to be aware of are:
- Are you being paid a salary? If so, when are the payment dates of the salary? Is the salary annual? monthly? per diem? Hourly? Is your salary in lieu of production. In other words, will you receive more compensation (e.g. a bonus) if you produce at a higher level and conversely will your salary be reduced if you don’t meet certain production goals. How is the bonus ascertained? Including an example as an exhibit to the agreement may be helpful.
- Rather than a salary most associate dentists are paid on a commission basis (a percentage of production or collections). Therefore, it is critical to ascertain whether your compensation is based on a percentage of production or a percentage of collections. Furthermore, if it is production is it usual and customary fee production or “adjusted production”? Of course, based on usual and customary fees your production will be greater than either collections or adjusted production. Most contracts are based on production since it is gross production or adjusted production and it is administratively easier to track. Nevertheless, if your percentage is based on collections you must be very careful to make sure that the collections that flow from your production are calculated accurately and therefore an understandable system should be developed in which should have the ability to audit if necessary.
- If you are paid on collections, please be mindful that you may receive compensation from the employer after you are finished working at their office. Of course, some of your production will not have been collected when you leave the employment; therefore, as those payments are received by the employer they will continue to pay you. Either an arrangement should be made to estimate such collections and give you a “final check” or have a system in which you can review and audit if necessary.
- What is included in your production? Do you get credit for your hygiene exams? Do you get credit for your exams? Do you get credit for x-rays that are ordered by you?
- What is deducted from your production? Laboratory fees? Dental appliance costs? Other benefits that you receive (e.g. continuing education fees, dues, licensure fees)? If there are some other deductions – how much? For example, are 100% of your lab fees deducted or a percentage of your lab fees?
- What happens if one of your patients does not pay – what is the duration of non-payment before an account is declared a “bad debt”? How much will be deducted from your compensation.
- What other employer paid benefits will you receive? Typically, a practice provides and pays for an associate’s professional liability insurance premiums, a continuing education allowance, state licensure fees, DEA fees and sometimes professional association dues. In addition, most practices have some form of a retirement plan. If so, how much if any will the employer contribute to the plan. For example, a 401K is primarily funded with employee contributions, yet, often an employer will match up to 3%.
- What is the “personal time off” (PTO) policy of the practice? If you are paid on a commission you are typically allowed annual PTO, but it is usually not compensated. Such term usually will vary from two to five weeks annually. You should ascertain what is included in PTO; for example, sick leave, bereavement and/or parental leave for maternity.
- Duties and responsibilities. Your written Employment Agreement will typically contain certain duties and responsibilities for your patient care, as well as your administrative responsibilities. Be sure you check to see if the practice has an “Employee Handbook”. This publication typically lays out quite specifically the duties and responsibilities of each employee, as well as duties and responsibilities of the employer. Many states either have statutes or court precedents that “integrates” an Employee Handbook as into either a written or oral Employment Agreement. In other words, an Employee Handbook becomes part of the Employment Agreement. Most people are unaware of such provisions within an Employment Agreement. Accordingly, if a circumstance arises, and the employer has an Employee Handbook, read through the handbook to see if there are provisions that apply to those circumstances. Beyond the foregoing, Employment Agreements typically contain:
- A specific or outline of the associate’s schedule. For example, the specific hours and days to be worked by the associate. In the alternative, the agreement may say something like “up to 36 hours per week.” You should define whether the hours you are to work are strictly in a clinical capacity or that you will also be responsible for certain administrative, management and marketing responsibilities.
- In the agreement, there should be a clear definition of your management responsibility over patients and staff, thus protocols for patient financial arrangements, case presentation, and treatment on family and friends.
- Contract Termination. Employment Agreements usually have provisions for the termination of the agreement and/or employment. Careful wording should provide that the employment is terminated, but not necessarily the Employment Agreement. Unless the agreement is terminated, some of the provisions could apply after the termination of your employment. Some other items to look for are:
- The time period necessary in order for the employer or employee to give notice of termination (typically 30, 60 or 90 days).
- “For Cause” Termination. Many contracts also have “for cause” termination clauses. These are circumstances in which you can be terminated immediately for some malfeasance (for instance, loss of licensure, conviction of a felony, or other misconduct). From an employee’s standpoint, these provisions should be very specific and be able to be empirically measured. For example, avoid having general terms like the associate disobeys the employer. This could be applied very capriciously. In contrast, a specific provision like a “material breach” or violation of a term of the employment contract or Employee Handbook.
- Covenant not to Compete. Most contracts will contain a Covenant not to Compete (or Restrictive Covenant). Most states apply a “reasonability standard”. Many courts may construe the restrictions on the employee very narrowly also. That is, they will favor an employee being able to freely move from job to job rather than put onerous restrictions on their ability to earn a livelihood. Even so, Covenants not to Compete, if done properly, ARE ENFORCEABLE.
- Covenants not to Compete must have a “reasonable geographic scope”, which is the geographic area in which you will be precluded from practicing after your employment is terminated. There is no standard geographical limitation, but varies by location. For instance, if you are in a metropolitan area, the limitation can be quite small (e.g. two or three miles). In a rural area it can be quite broad (e.g. 50-60 miles).
- The durational limitation must also be reasonable. Remember most courts disfavor harsh limitations on employees, thus for example, any limitation over one year may be unenforceable.
- There is typically provisions for your non-solicitation of patients and staff. This limitation would include direct solicitation of patients and staff (including contacting them electronically or through written communication), as well as solicitation within the scope of the geographical and durational restrictions.
- Although rare, sometimes you may have “liquidated damages” clause within an Employment Agreement. A liquidated damages provision would provide a specific dollar amount that the employer would receive from the employee for a violation of the covenant not to compete.
Once again, the above is not an exhaustive analysis of Employment Agreements in general or dental associate agreements specifically. Hence, you must consult with a competent employment law attorney before signing any agreement. Although there may be a cost to have your agreement reviewed, it will be money well spent if it saves you income, time and anxiety.
Kevin A. Shea, JD, is president of Shea Practice Transitions, PA and is a long-time ADS member. You may reach Shea at firstname.lastname@example.org or 952.920.9411.