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A Tale of Inherited Problems by Paul Edwards

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Several years ago, I received a call from a dentist—let’s call him Dr. Grant—who had come up with a profitable formula for purchasing small practices as their owners retired. By the time of our conversation, he had accumulated 14 existing practices, and things had been going great for several years. In fact, not only was his kingdom prosperous, he was making money hand-over-fist.

The secret to Dr. Grant’s success was this: with each practice purchase, he changed as little as possible. He kept as many of the current employees as he could, and hired associate doctors as independent contractors to run the practices. Some transitions were smoother than others, but overall things were going well, and he dealt with problems as they came up. He also discovered that each time a practice purchase went through, he’d inherit a new set of HR policies, including some he’d never seen before. “What a great way to pick up new ideas!” he thought. And with 14 practices in his stable, he could test out which ideas worked the best, spread the good ones around, and get rid of the rest.

Sounds like a foolproof plan, right? Not quite.

How a “Good Idea” Goes Bad

On the surface, Dr. Grant’s approach sounds perfectly reasonable. He told me, “At the time, I thought, wow, this is great! I felt like we were gaining an advantage from all this knowledge the previous owners left behind. We started adopting the ways other practices did things, their HR policies and management techniques, and even spreading the best ideas around.” One of the ideas Dr. Grant liked the best:

Any dental services extended to an employee’s family members will be paid off before the employee leaves the practice. If payment is still due at the time of separation, the employee agrees to let the company deduct the unpaid amount from his or her final paycheck.

This agreement sounded like a great idea to Dr. Grant, so he implemented this policy in each of his 14 practices. He did this with a few other common-sense policies as well.

But there were problems brewing.

When the HR Hits the Fan

Unfortunately, as Dr. Grant’s business interests grew, his liabilities were growing, too. He just didn’t know it. He was taking on policy after problematic policy with each purchase, and in some cases, he was even spreading some of these borrowed policies throughout his 14 practices because they seemed like such great ideas. He was assuming they were tried-and-true by the original owners, when instead they were poorly written, full of loopholes, lacking protections, and, in some cases, even downright illegal.

Dr. Grant paused and sighed. “Last week, I lost a battle with a federal agency—my first—because of a policy I had.” To be specific, it was the final paycheck withholding policy mentioned earlier. It turned out that policy is illegal in his state. Even worse, when a former employee’s labor attorney found that one mistake, the hunt was on to find more. Poorly written policies left Dr. Grant open to discrimination claims, and the labor attorney filed an age discrimination case on behalf of the former employee.

The bad news didn’t end there. The reason the federal agency allowed the age discrimination complaint to go forward was because Dr. Grant had more than 20 employees. It turned out that he had misunderstood the nature of his LLCs. He thought he was a small employer with five or six employees in 14 different practices. However, in the eyes of the government and enforcement agencies, based on his circumstances, he was a single employer of more than 50. That was news to him! So now federal and state laws and regulations that he thought didn’t apply to him were not only applicable, but could sink his entire operation.

Dr. Grant’s story didn’t have a particularly happy ending. He ended up settling the age discrimination case for $250K plus legal fees. His attorney also advised him to get his house in order (all 14 rooms of it) and get someone to manage the HR side of his company to stop the bleeding. Finally, some good advice!

Additional “Good Ideas” That Are Actually Bad

Let’s take a look at some of the other “good ideas gone bad” that Dr. Grant accumulated from his various practice purchases:
  • Misclassifying hygienists and associate doctors as independent contractors, to save on employment taxes
  • Paying employees fixed salaries regardless of time worked or classification
  • Not requiring employees to record their time because they’re “all on salary”
  • Implementing and enforcing “no gossiping” policies
  • Implementing and enforcing “repayment at separation” policies that require employees to pay back seminar fees if they quit
  • Misunderstanding that time an employee spends working at different locations on the same day is still calculated into the same paycheck , and that overtime rules still apply
  • Making unlawful deductions from final paychecks (this simple issue is what caught the attention of the labor law attorney in the first place)
  • Not having a policy stating that employees should report issues to management so management can deal with them (this killed him in the age discrimination case)

By now, some of you must be thinking, “He should have had a good attorney.” He did—and he still does. Unfortunately, that attorney, a genius when it came to structuring buyouts, had very little specialized knowledge in the areas of employment regulations and HR compliance. Plus, as Dr. Grant commented, “I’d been in practice for 30 years. I thought I had this stuff figured out and I didn’t want to bother him with it.”

Never Assume

Years later, I sat with Dr. Grant and we started reminiscing. I asked him, “What would you want others to take away from your story?”

He thought about it and answered, “I was trying to use common sense to solve my office problems and save a little money. And it worked for a while. But when I look back, there were important areas I needed help with—rules I didn’t think applied to me, and others that I didn’t even know about. And if I had known all those good ideas were actually bad ones, I could have avoided a lot of heartburn and saved myself about half a million dollars.”

Now, I tell this story not to dissuade you from buying a second practice, but as a reminder to approach a new purchase with open eyes instead of rose-colored glasses. Because even if Dr. Grant had used a couple of those bad ideas, but only in one location rather than spreading them around, he would have had far less liability. And in any practice, a little more knowledge about wage and hour laws, independent contractor rules, and a bit of consistency go a long way toward preventing that massive legal payday.

It might not always be possible to foresee and avoid every problem when setting up or taking over a practice, but you can mitigate the biggest and most common vulnerabilities. Start by checking that your current practice doesn’t have the problematic policies mentioned here. Secondly, learn how to transition (or not) the new practice’s employees effectively. You can read more about this in our article, “Strategies in Transitioning Employees in a Practice Purchase,” at www.cedrsolutions.com/dtpractice.

Whether you own one practice or 10, the advice ultimately remains the same: Get your HR right. Get it checked by an expert. Be consistent, and use one (legally compliant) set of employee policies. You’ll avoid liability—and save money—in the long run.


Paul Edwards is the CEO of CEDR HR Solutions (www.cedrsolutions.com), which provides custom employee handbooks and unlimited HR support to dental offices of all sizes across the United States. He has more than 25 years of experience as a manager and owner, and specializes in helping dental offices successfully navigate employee issues. He can be reached at pauledwards@cedrsolutions.com or 866-414-6056.
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September 2025
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