Are dental associates independent contractors? In short, it depends upon what kind of agreement they sign. Any dental associate is going to be either an employee where you’ll sign an employment agreement, or you’ll be an independent contractor where you’ll sign an independent contractor agreement. Let’s talk about the differences between the two. Well, first, if you sign an employment agreement, you will receive a W2. Taxes will be taken out, it’ll usually be provided benefits such as health vision, dental, life, retirement, and disability, they’ll pay for your dental license, DEA registration, usually some amount for continuing education, and you’ll get paid time off. There are certainly benefits as far as ancillary benefits if you’re an employee versus an independent contractor.
As an independent contractor, the dental associate will not be given any of those things. So, they’ll have to pay for nearly all the benefits for themselves. They’ll have to pay for their own license, their own DEA. The one thing that many practices will pay for, even if it’s an independent contractor agreement will be professional liability insurance. However, if it’s a claims-made policy, which it normally is, the dental associate would usually be on the hook for tail insurance. I mean, the benefit of an independent contractor agreement or at least the theoretical benefit is that it should be kind of easy in and easy out, meaning, either party can kind of get out of the agreement quickly. I don’t find that’s usually the case. I think most practices still include all the negatives of an employment contract in an independent contractor agreement and don’t offer any of the benefits.
One of the main discussion points that I’m talking about with the dental associate about their employment contract is, alright, what are the things that are going to affect you after the contract finishes? Those would be: do you have to repay anything? Like signing bonus, relocation assistance, any of the licensing fees, and if you leave within a certain period, do you have to pay those back? Second, who pays for tail insurance? As I said before, if it’s a claims-made policy, you need to purchase tail insurance, then who’s responsible for that? And then, more importantly, the restrictive covenants. Those will be the non-compete and the non-solicit. Non-compete obviously is just you can’t for a certain period, usually a year or two, can’t work as a dentist within a specific geographic region, usually 5 to 10 miles from the practice location that you worked at, or maybe multiple practices. Other blogs of interest include:
The independent contractor agreement, ideally, wouldn’t have any of those things in it, but I find that they usually do. What is the benefit of an independent contractor agreement? Well, it depends upon the compensation. I guess a dental associate would have to do the math of, alright, if they’re offering me an employment agreement and the compensation is this, whereas if they’re offering me an independent contractor agreement, my compensation is this? You have to do the math between the two. And the reason why they would be different is if the employer doesn’t have to pay any of the benefits, which usually could add up to thousands of dollars a year, then theoretically, the dental associates should make more under an independent contractor agreement. If you’re given the exact same compensation but offered one versus the other, I mean, it doesn’t make any sense to go the independent contractor route.
You’re going to have the same restrictive covenants, you’re going to have the same compensation, but then you’re going to have to pay for all the expenses that go with being a dentist. Now, you could form an LLC and then expense those as business expenses and all that kind of stuff, but still, it will likely be more expensive for you to get your own health coverage and vision and dental and life and all that than if you went through a group plan with an employer. Now, most dental associates, honestly, don’t have the option. I mean, most practices aren’t going to say, okay, you can be an employee, or you can be an independent contractor. I don’t care. It’s up to you. Most of the time, you’re just going to figure out, alright, what are they offering?
And then what are my alternatives elsewhere? If I was a dental associate the employee route would probably make the most sense, at least at first. A lot of the independent contractor agreements are kind of volume dependent. Maybe you’ll get a daily rate, but maybe it’ll be based upon your collections, your encounters. And when you enter into a practice, they make it sound great, but the volume certainly cannot, I don’t want to say usually, but many times it’s not what they kind of told you during the interview process. And so, if you’re being paid purely on productivity and the volume’s not there, it’s a problem. And if you decide, alright, this isn’t working out and you leave, well, you still have all those negative things that I talked about earlier with the restrictive covenants and the paying back the bonuses and the tail insurance and all that type. So, is one better than another? It just depends upon the situation, but as a dentist, you need to think, alright, well, which one best suits me?
And if it’s the exact same terms for both, it doesn’t make a lot of sense to be an independent contractor. I mean, the main reason why employers do this is so they can avoid paying employment tax. I mean, they’re not going to say that, but that’s at least I find that’s why most of them do it.
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