So, you’ve graduated dental school or are getting close...CONGRATS! You are actively interviewing for your first Associate position and get handed the almighty Associate Agreement. Now what? In this blog, we explore a few key elements of Associate Agreements with which every dental school graduate must be familiar.
Employee vs. Independent Contractor
The first key determinant in your Associate Agreement will be whether you will be hired as an employee or an independent contractor. An employee is generally anyone who performs services for an employer and under the control of that employer, while an independent contractor is a self-employed individual (or entity) who performs services for another entity as a nonemployee. There are varying pros and cons to being classified as an employee vs. an independent contractor, which you can read more about here! However, in the dental industry, the benefit of being an employee is that your support staff is provided, you’re protected as an employee under state law, and you don’t have to bear the cost of purchasing your own equipment (especially if you’re coming right out of dental school!) On the other hand, the benefits of being an independent contractor are that you have the ability to choose your own supplies and equipment (albeit at your cost), you’re in control of your schedule and you decide how your “practice” is run. Ultimately, the classification of employee or independent contractor makes the biggest difference in how you are compensated and how employment taxes are filed.
Compensation
Unlike traditional employment agreements, Associate Agreements can vary vastly in compensation models, such as: (i) percent of net production; (ii) percent of net collection; (iii) daily minimum; or (iv) flat-rate salary. Ultimately, both the practice owner and the associate should have the common goal of elevating revenue thresholds and growing the practice through great patient service; however, certain compensation models prioritize this goal more so than others. Compensation based on net production means – as the name states - you are compensated based upon what you produce, which contemplates the total amount billed for the services rendered. Compensation based on net collection also is dependent on what you produce as an associate, but it varies in that it contemplates the total amount of payments actually collected by the practice. In both models of net production and net collection, the associate could expect to be compensated between 30-35% of net production or collection less laboratory costs; however, percentages may vary dependent upon the skills and experience of the associate. It’s advisable for associates who are presented with the net collection compensation model to inquire with the practice what their collections process looks like and their past collection history. The daily minimum compensation model is frequently utilized amongst newer dental associates, in which the associate is compensated a flat rate for each full day the associate works at the practice. Daily minimums (for new associate dentists) can range from $400.00 to $600.00 daily, which can provide more certainty than the other models do. Finally, a flat-rate salary is fairly uncommon for a new associate dentist, but nonetheless may be the compensation structure at your practice. With that being said, a flat-rate salary does provide a dependable number that you can count on; however, it also puts a ceiling on how much you can earn, which generally does not happen in a percentage arrangement. Ultimately, compensation is a fundamental part of your Associate Agreement and so it’s important to understand all of your options.
Non-Compete / Non-Solicitation Provisions
Another major component of Associate Agreements is the non-compete and/or non-solicitation provisions, which are often grouped together as “Restrictive Covenants” in an Associate Agreement. A non-compete prevents an associate dentist from engaging in the practice of dentistry at the end of the employment relationship with the dental practice. A non-compete will generally limit the associate in a specified geographic area for a period of time. The geographic area of a non-compete can vary greatly depending on the location of the practice. For example, in New York City, a geographic radius of 10 miles is much more detrimental than it would be in a more rural setting. A lawyer can help determine whether the proposed non-compete is "reasonable," which is the standard for determining enforceability. Furthermore, new dentists may want to pay special attention to whether the non-compete is triggered immediately upon hire or if instead there is a probationary period to start. A non-solicitation provision prevents an associate dentist from actively soliciting patients, employees, suppliers or referral sources from the dental practice for a specific period of time (usually the same time frame as the non-compete). Some non-solicitation provisions go beyond just mere solicitation of patients and can include servicing patients as well. The general purpose behind employers including stringent non-compete and non-solicitation provisions in their Associate Agreements is to protect their dental practice from an associate potentially utilizing insider knowledge of the practice and/or enticing patients and employees to leave with them. A lawyer can help review these types of provisions and assess their enforceability. If you’re a dental student, a recent dental graduate or a dentist looking to receive assistance in reviewing your Associate Agreement—the attorneys at Marti Law Group are here to help! With vast knowledge of both the business and legal side of the dental industry, we can help guide you through what is industry standard, and more importantly, what is not. Contact us at (860) 552-7770 or info@martilawgroup.com.