How long are most veterinarian associate contracts? First, you need to know two things to determine the average length of a contract. One is how to terminate the agreement, and two, does the contract automatically renew? Let’s kind of hit all of those.

There’s usually an initial term to the contract. An initial term means the length of the contract before it ends. Or, if there’s a language, it could automatically renew for successive terms after the initial period ends. The average length for an initial term is somewhere between two to three years. And so, in most contracts, after that two or three-year period ends. As I said before, there’d be language that states it automatically renews for one-year terms after that. And then it just continuously renews unless terminated by the vet. That’s a normal amount of time. If you have a five-year contract, it’s abnormal. 

Employee or Employer Can Terminate Employment Agreements

Now, does it ultimately matter? Not really, because of this: every contract will have ways that the vet or the employer can terminate the agreement. There will be a without-cause termination clause. And this means either party can terminate agreements any time with a certain amount of notice to the other party.

You could be one month into your job. You hate it, maybe especially lately, the lack of staffing makes your job impossible. Or perhaps you’re being paid on pure productivity, and the volume is terrible. And you’re like, this is not for me. In the contract, if you have without-cause termination, usually, it’s somewhere between 30 to 90 days for most veterinary associates. And so, you would say, I’m giving you my notice, and then, let’s say it’s a 60-day time. You’d work out those 60 days, and you could leave at the end of the 60 days. If you can terminate the contract at any time and reason, the contract length doesn’t matter in some ways. 

If you had a five-year term but could terminate the contract with 60 days’ notice, it’s only a 60-day contract. You can think of it that way. Now, when is a good time to renegotiate the agreements? Well, usually, it would be at the end of whatever year period. Let’s say you’re just on a straight-based salary. You may approach the employer, and say, I’ve been this productive, and I believe I deserve an increase to this amount. Some people are concerned that if it just automatically renews forever, the job’ll stick them with the same salary forever.

Veterinarians Can Negotiate their Employment Agreements

You can renegotiate at any time. Go to the employer and say, look, I’m generating $600,000 a year, and only making a hundred thousand. I want an increase. For most veterinarians, it would be between 18 to 22% of their net-collections. In that scenario, you’ll say, if you don’t raise my salary, I’m going to give you notice and then leave. And obviously, they may call your bluff if you’re not willing to leave. But that’s a good stopping point to say to them, look, I’m worth more than what. And it’s time to renegotiate.

The average contract length doesn’t matter if you can terminate the contract at any point. Is there one length that’s better than another? Not really, not taking that into account. Now, there is one other type of length of term, it’s called an evergreen contract. And this is being used more and more lately for whatever reason. There is no initial term set. So the contract will continue forever until one of the parties terminates agreements per the contract terms. Once again, that’s fine if you can terminate the contract without-cause at any point. If it’s a contract that goes on forever still is just if the notice period is required. So, that’s a little primer on the average length of a veterinary employee contract agreement.

Other Blogs of Interest

• Is 10 Miles a Reasonable Non Compete for a Veterinarian?
• What is a Draw in a Veterinary Associate Contract?

Veterinary Professional Practice Benefits

Veterinarians are in high demand. People want to do everything within their power to care for pets so near and dear to their hearts. And the skills that a veterinarian brings to the table are highly prized. The supply of veterinarians is somewhat lacking compared to the overall demand in the market at this time. This meant employers had to look at ways to sweeten the deal to get as many vets as possible.

Why Employers Require a Contract for Veterinarians

Many jobs in any business or industry require a potential employee to sign an employment contract. One that lays out the foundation and terms of employment. And the benefits of coming to work at a specific facility. Often, they do this as means of encouraging people to accept a particular job offer they might not have otherwise. When benefits are laid on the table, it’s easier for people to see why they should work for a specific employer. One they consider working for. 

Employers will always ask veterinarians to sign a contract of employment before they can begin their work. After all, the business veterinarians do is often so delicate and sensitive that no aspect of it can be compromised. The employer needs to know what they are getting for their business when they offer employment to a veterinarian. On the plus side for incoming vets. They can see the benefits they’ll receive all laid out in a way that makes it clear what to expect.

Benefits of Veterinarian Contracts

Employment agreements benefits include the fact that it can provide some much-needed stability to the veterinarian. Many veterinary contracts are designed to run for 12 months or longer. Thus, veterinarians can feel confident that they will be employed at a specific facility for at least a year. That is, if they don’t do anything egregious, that will nullify the contract. We’d also explore some additional upsides to veterinarian contracts to clarify why these documents are so important to many.

Professional Liability Insurance

No matter how talented someone is at their job, there is always a risk that something terrible could go wrong. Veterinary Practice News explains why vets are strongly encouraged to purchase protection that’ll keep them and their veterinary practice safe: 

As claims become more common and damages rise, defending against malpractice claims becomes more expensive and necessary for veterinary practices. Like many professionals, veterinarians commonly purchase professional liability (malpractice) insurance to guard against the expense of defending against such claims. If an employer can add professional liability insurance as a benefit to the contract, this is all upside for the veterinarian. It is a total relief. It means they may not have to pay for this insurance out of their pocket. Unless they want supplemental coverage beyond what the employer provides. 

Clients are often very particular about how their pets are taken care of. They may feel that they have a claim against you if something goes wrong with their pet’s care. And in the business of medicine, events related to malpractice can have a long damaging effect on the vet’s career. That’s why all vets considering a new employment offer should speak with a veterinary contract lawyer. In order to review the paperwork the employer asked them to sign. And to ensure it includes extensive liability insurance protections. 

Retirement Accounts

Everyone must think about their financial future as they are still actively working. Preparing for the fact that you won’t be able to work as you do now someday is a wise practice. Simply because it is the reality of the situation. It would help if you prepared for the day when you are past the age of working. And need to rely on the savings you have accumulated throughout your working life. A 401(k) plan for veterinarians should be automatic in any agreements they sign. This is to say what any veterinarian thinking about signing up for a job with a given employer should recognize. The employer needs to offer a 401(k) plan for the vet to consider it.

PTO and Sick Days

Veterinarians considering a new work may want to give special consideration to personal time off (PTO) and sick days allotted. The reason? Because they must have the opportunity to establish some work/life balance in their existence. 

A burnout crisis is sweeping through the practice at this time as the number of clients continues to grow. Many vets must work far more hours under far more challenging conditions than they usually would. Given all this, it’s abundantly clear that vets need to catch some breaks. And be allowed to recover from the onslaught that is their job. When looking over contracts, veterinarians should see how their time off breaks down into different categories, such as:

• Sick days
• Vacation days
• Personal time off (PTO)
• Flex time
• Holidays

Employers have different definitions for how they look at time provided to their employees to take care of their needs. Before signing employment or independent contractor agreements, it is crucial to understand what those definitions are. 

Discounted or Free Services

It would be unusual for a veterinarian not to have a pet (or two, or three!) of their own. Thus, it is a reasonable assumption that the vet may receive special discounts or even free services from their employer. They may not want to work on their pet for understandable reasons. But they may have the opportunity to receive veterinary care from a co-worker who can help them out. Their employer should discount this service as part of the terms of their employment. This may seem like a small thing. But it makes a big difference in the lives of busy veterinarians with multiple pets that need taking care of. Getting a little break on those services can be the cherry on top. 

Reach Out Today

Before you sign on to any professional veterinary offer, we would like to have the opportunity to discuss it with you. We intend to help you understand every element of your contract (including an analysis of your non-compete agreement). And if said contract makes sense for your needs. Please get in touch with us. Let us know how we can start the process of helping you receive the assistance that you require.

What is the difference between a veterinary associate’s offer letters and employment agreements? Often, if a vet is either coming out of training or switching jobs, the organization they’re looking at may say, well, we want you to sign this offer letter before we present you with an employment contract. That’s standard. 

Should You Negotiate the Terms of the Offer Letter?

Now, a couple of things to think about: do you or should you negotiate before signing the offer letter? The answer is yes. I mean, an offer letter contains basic terms. So, compensation bonus structure, the length of the agreement, probably some basic information about a non-compete and benefits. It will not be detailed. It’s usually one to two pages at the most that just kind of goes over basic terms. If they offer you a hundred thousand dollars and you want 120, you should say that in advance and get that amended into the offer letter.

Are Offer Letters Binding?

Now, an offer letter is not binding. It could potentially say in the offer letter that it is binding. In that case, then I guess, yes, it could be, but I can’t recall a time where an offer letter ever had any language that states it’s binding. If you sign an offer letter, agree to terms, and then they present you with an employment contract. It doesn’t mean you can’t renegotiate the terms you’ve already come to an agreement on. 

Why? Well, if you just see the basic terms of an agreement, it may look great at the time. And then when you get into the language of the contract and the specific details, it could change things. For instance, let’s say the offer letter stated there is a non-compete, but it had no details about how long it lasts or the geographic restriction. Then in the contract, it states you can’t work as a vet for two years within 50 miles of your clinic, which would then force you to move if you wanted to get a new job. 

It might have looked great at the time, but once you see there’s some insane non-compete, it completely changes whether the agreed-upon salary is worth it. Maybe they might say, well, it was worth it for a hundred thousand with a normal non-compete. But with this very restrictive non-compete, I want 140, or I’m not going to sign. So, don’t feel like you’re locked into the terms you’ve agreed upon if the contract has changed, or at least once you see the details, it changes how you think about it.

Should You Negotiate the Terms of the Employment Contract?

Now, how to approach the employer in that situation? It’s delicate. You do need to go back to the employer and just say, these are the reasons why I was okay accepting this salary before, but now I’m not. I think most savvy business people are going to understand. They might be ticked off or act like, well, we’re not changing anything, and that’s fine. But then it’s your decision whether to sign the employment agreement or not. 

Providing them details and reasons why you were okay with the initial terms but now you’re not after reading the contract’s language is important to reduce the amount of, I guess, potential bad blood between the new employer and yourself. Once you sign the employment agreement, those terms are set. There’s no wiggling out of the terms reached once you sign the employment agreement. So you need to make certain prior to signing the employment agreement everything that you are concerned about is in the document, it’s been negotiated. 

Any employer states to you, oh, we’ll work out the details after you sign, or I’ll work out the details after you start, that is a bad idea. It’s a big red flag as far as an employer goes as well. Any good professional employer is not going to take that tact. They’re going to say; we want to have all the details. We want all the cards on the table, everyone knows their roles. And everyone knows what they can, can’t do, and what’s required. Starting there and working out the details is a bad idea.

Other Employment Contract Terms You Can Negotiate

As far as an employment agreement goes, I’ll just break down in the most basic way the things that most vets need to think about. The length of the term and how to terminate the contract.

You want to have a reasonable without-cause termination. You want to make certain that the employer is paying for your license, DEA if needed, malpractice, some kind of ancillary benefits. The non-compete needs to be reasonable. There shouldn’t be any kind of penalties or liquidated damages if you terminate the agreement, the compensation structure needs to be clear, it needs to state when bonuses are paid out, when the salary is paid out, and how it’s calculated.

I find that vet contracts generally list specific things for which the vet will be paid. You want to make certain that what is on that list is everything that you value and plan on doing. And that they’re not excluding things that normal vets would be paid for.

Summary of the Differences Between Offer Letters and Contracts

The main difference between an offer letter and an employment agreement is the offer letter is just kind of an entree that you may agree to terms. It is 99% of the time not binding. And you can still renegotiate terms once you’ve seen the language of the employment agreement. Negotiate the terms before signing the employment agreement. Because once you sign it and it’s, in fact, binding, you need to follow the terms of that.

Other Blogs of Interest

• Veterinary Professional Contract Benefits
• Should a Veterinarian be a W2 or 1099?
• How to Negotiate a Veterinary Associate Contract

Red Flags in a Veterinary Associate Contract

What are some veterinarian employment contract red flags?  Let’s say you are just coming out of training, or maybe you’re even switching jobs, and you have a new employment agreement. What things do you need to consider regarding what could make an agreement, maybe not such a great opportunity? 

Salary

Compensation clearly is usually the number one thing in most people’s minds. Many veterinarians will use the ProSal method, which involves a percentage of the net collections that the practice receives based upon your personally produced services. There’s usually some kind of hybrid where you’ll get a base plus a percentage of the net collections. But negative balances in that situation can be moved forward. Let’s kind of dive into that quickly. 

If you’re a veterinarian associate and you’re moving into practice, you need to think if it’s not just a straight-based salary, which is often. In that scenario, you get paid a base amount, a hundred thousand a year, you work your normal hours, and that’s that. If it’s a collections-based method, your volume, how many clients you see, and how much you do per day will directly affect how much money you make annually. 

Lack of Staff

And especially lately with kind of vet staffing at difficult levels for nearly anyone in the industry. Vet techs and front office staff are difficult to find at this point. I know plenty of vets are struggling with volumes simply because they’re having to do things that a vet tech would do in addition to seeing all the normal patients that they would. So, monetarily, looking at whether the practices staff appropriately and as efficiently, which will allow you to be as efficient as possible and then be as productive as possible, is important. 

You need to ask those hard questions. Have you had any problems with staffing lately? If you have, what are you doing to correct those problems? What’s the average volume for the current veterinarians in the practice? Those questions are important and even ask hard numbers. What is the average net collection for a veterinarian in my specialty in this practice? That way, you can kind of gauge what your ultimate compensation is going to be.

Unwillingness to Provide Data

If you’re looking at an employer and they’re unwilling even to give you moderate data as far as that’s concerned, it’s a huge red flag. Because normally, it means, either they’re so disorganized, they don’t know what the numbers are. Or, they’re so bad, they don’t want the vet to know about them. So, the first red flag is ensuring they’re staffed appropriately. Which will make you more efficient and ultimately lead to more money for you. 

No Without-Cause Termination in the Agreement

The second huge red flag is if there’s no without-cause termination in the agreement. In almost any provider agreement across any industry, physicians, dentists, veterinarians, or whoever, there needs to be without-cause termination. And that means that either party can terminate the agreement at any time with a certain amount of notice to the other party. If there is no without-cause termination, let’s say a vet has a three-year contract, and then there’s no way to terminate contracts early.

Well, I find that the contracts that cannot terminate the agreement without-cause usually mean that that employer has had a very difficult time staffing and wants to lock in vets under any circumstances. And if they have high turnover, they have trouble holding onto vets. It usually means they’re kind of. I would say, bad business people, or maybe they treat the vets inappropriately or not with the professionalism that they deserve. 

So, you need without-cause termination in the associate veterinarians’ contracts. Normally, it would be somewhere between 30 to 90 days. If it’s 180 days a whole year’s notice, you can’t accept that. It needs to be shorter just for that situation. And especially if you’re being paid purely on production and you have no way of getting out of the agreement, and your compensation is just completely nose-dived, you are stuck. Unless you find some way that they’ve breached the contract, you need the ability to get out.

Terms of the Restrictive Covenants

And then the last major red flag would be the restrictive covenants. The non-solicit and then the non-compete more importantly. The non-competition clause is enforceable in most states. There are few where it’s not, but for the most part, non-competes are enforceable. And that says the vet can’t act in their specialty for a period within a certain geographic radius. Normally, a non-compete would be one to two years, somewhere around there. One would be more favorable. And then as far as the geographic restriction kind of varies wildly amongst location and a rural environment.

It might knock the vet completely out of the town. Whereas if you’re in a big metropolitan area, it could be five miles up to 20. You want to ensure those are as tight as possible. Meaning you want it only from one location or your primary location for the smallest radius possible. That way, you don’t have to necessarily move. 

Long Non-Compete

Now, if you get a non-compete, it’s five years long and knocks you out of the five contiguous counties that you’re in, that is not a reasonable non-compete, and you absolutely should not sign that. Now, some people may move for a job and then have absolutely no intention of staying there if the contract ends. So, for them, the non-compete doesn’t matter at all. But if you have ties to an area, you have family in the area. Your kids are going to school. There’s like 0% chance you can move if the contract ends.

You need to ensure that you have a reasonable non-compete, so it doesn’t completely affect your lifestyle for a year or two or however long it is. So, those are three major red flags. Doesn’t have cause termination, are they staffed appropriately so that your compensation isn’t affected? And is the non-compete fair? There are several other red flags too, but I’m just going to focus on those three in this blog.

How Should You Negotiate a Veterinary Associate Contract?

How should you negotiate a veterinary associate contract? There are many things to consider when you want to negotiate your contract or an employment agreement. First, you want to understand how much leverage you have and what I mean by leverage. I mean, are you just out of your schooling? Do you have any experience? Are you specialized? If you’re specialized and very few are in the veterinary industry, you have more leverage. 

But you might have a little less leverage if you’re just out of school for general veterinary practice. And then also, if you’ve been practicing and you have a substantial client base and lots of years of experience, you may have more leverage in relation to that. Once you understand how much leverage you have, then you need to understand what you should be asking for. 

Negotiating Base Salary

The first thing I always see our clients want to negotiate is their base salary. Base salary or base compensation is just the flat you’ll get every month upon continuing your employment. The problem is that veterinarians are normally compensated, not just through base compensation. You’re also normally compensated through collections. That’s the typical sort of layout of compensation for really any type of veterinarian. Even if you’re specialized, it’s normally base compensation, and then there’s a part of collections. So yes, the base compensation is important, but there are so many other aspects to an employment agreement. 

Your percentage of collections can be huge. You want to fight probably for a larger percentage of collections over just a base salary because the base salary will never change unless you renegotiate in the future. But if you have a substantial client base and you know that you’re going to be bringing those clients in, you will want a higher percentage of your collections which you can make well over your base salary. It’s something to consider. I know base salary is the big number on an employment agreement, but you also want to think about collection percentage as well, because you can make a lot more money with a higher collection percentage if you know that you are going to be bringing in those clients. 

Other Contract Terms Found Better Than Compensation Alone

Now, if you are out of school and do not have an established client base, and maybe you’re not replacing someone at a veterinary practice or clinic, they’re just expanding. It will take a while to build up that client base. Then you, in that situation, might want to fight for a higher base compensation or salary for a year or two so that you can establish, as I said, that nice client base. 

Restrictive Covenants

Other things that can be more detrimental to you than even the compensation are those restrictive covenants. And what I mean by restrictive covenants are non-compete clauses and non-solicitation clauses, but specifically the non-compete. Right now, the veterinary industry is booming, and practices bringing on and employing veterinarians are protecting their interests. And so, sometimes, these non-competes can be unreasonable and can attach to many locations or just many miles from one practice. 

So, you want to consider that because if you are establishing a client base, you’re working hard, you’re bringing in clients, and then you decide to leave the practice, or they decide to terminate their employment with you, you could have a serious problem. You might not be able to practice in the area. You could even have to up and move your family. Non-compete clauses are extremely important that you want to negotiate in your initial employment agreement. And often, it’s overlooked because it’s something way in the future. And you’re excited about this prospective future employer, or you’re right out of school and want to start earning money.

A Word of Caution About Non-Competes

And so, that’s what you’re focused on, but non-competes are those sneaky clauses in employment agreements that can hurt you in the future. I would say more than anything. A non-compete agreement is something that you should always negotiate. Now, they’re normally a mileage from specific locations that you can negotiate. And then also, for a specific period, they can be anywhere from six months to three years. 

And I would always try to negotiate that amount of time down and then always the miles down. When you’re negotiating how many miles, you also need to consider, can you find work outside of that restricted area without having to up and move? And then you also want to know what’s restricted. Sometimes the non-compete clauses specifically for veterinarians may just say that the practice of veterinary medicine is very general. If you’re specialized, I would negotiate that it’s only within your specialty.

Negotiate Non-Competes

So, you want to negotiate non-compete clauses. Those are most important. Non-solicitation clauses just mean you can’t solicit clients or employees coming with you. And sometimes, that period can be negotiated down to six months or a year before you can reach out directly to those clients or to those employees. Then you have your sort of ancillary benefits. In your continuing education, you’re typically given an allowance yearly, anywhere from 2,000 to 4,000, typically within a veterinary practice. 

You can negotiate that money because if you don’t, then you must pay for your continuing education to keep your license. So, that’s something I would negotiate as well. And then also any dues, fees, licensing, all those costs add up. And we don’t think about that when we’re just looking at the base salary and how much money you’re going to make, but these sorts of costs can be negotiated at the beginning. Then it will save you a lot of money in the end and a lot of headaches as well. 

What Needs to Be in a Termination Letter for a Veterinarian?

What needs to be in a termination letter for a veterinarian who’s employed at a veterinary practice? The short answer is that it needs to be direct and doesn’t need to include too much. To start, though, first, you need to know if you can terminate your contract if it has to be for-cause or without-cause, and you’re going to start with your employment agreement. 

There’s normally, or there should be, and you should always look for this before you sign an employment agreement, a without-cause termination. And what that means is you can have a cause, or you can have no cause at all. And you don’t have to disclose that when you terminate your employment with the veterinary practice. Normally, there is a notice provision in there that states that you must give the employer anywhere from 60 to 90 days’ notice that you will be ending your employment agreement.

How to Give the Proper Notice of Termination?

There’s also going to be a clause in your employment agreement itself that normally states how to give proper notice. So, where are you going to be turning that termination letter into? Is it a person? Do you have to mail it, hand-deliver it, or email it? Every contract should have a notice clause. However, they’re all vastly different. So again, read that employment agreement. It will tell you how to turn in that letter. 

Now, most of the time, I would say that it has to be in writing. Sometimes you can email it. Sometimes you can hand deliver it. You also want to be careful if it states that you must mail your termination letter. Normally, there’s an address where to send it, and even sometimes, there’s more than one address. So, you want to be careful. Also, it will explain to you if your notice starts the day you mail your letter or if you have to count anywhere from one to three days before your notice starts.

This is important. You should read this before you write your termination letter because, in the termination letter, it should state that you are terminating your employment, giving you proper notice and that your last day will be, and then you can fill that in. If you want to thank them for all of their support and opportunities, you can, but only what’s required is that it’s in writing that you are notifying them that you’re going to terminate this agreement. It’s also helpful sometimes if you want to let them know that you will assist them with the transition to a new veterinarian, but all situations are kind of different, depending on your relationship with them.

Let’s just take what a W2 and 1099 mean and then the employment relationship between both of those. And then kind of talk about which one is probably better for the vet. First, if you are a W2 employee, you are an employee, you’re not an independent contractor, and you’ve signed an employment agreement. And so, the taxes will be taken from whatever your compensation is biweekly, monthly, whatever their pay period is. 

Benefits of a W2 Employee

In a normal employment relationship, the benefits you’re going to get would be:

• Malpractice insurance
• Health
• Insurance
• Vision
• Dental
• Life
• Disability
• Retirement
• they’ll pay for your license
• DEA registration if necessary
• Credentialing

So, they will pay for all the normal things that kind of go into being a vet. 

Cons of a 1099 Independent Contractors

Whereas if you are a 1099, you are an independent contractor, you’ve signed an independent contractor agreement with the employer, and you are not an employee, meaning, no taxes are taken out of your payment, so they’ll just pay you. And then ultimately, it will be your responsibility to then pay the state and the federal government for any of the taxes. 

Now, when you are an independent contractor, the employer, generally, isn’t going to provide any of those benefits at all. Sometimes, they’ll pay for the underlying malpractice insurance, although malpractice insurance is extraordinarily reasonable for vets. It could be $300 or $400 a year for a general vet. They’re not going to pay for your license, for your DEA. They won’t provide benefits.

So, no health, vision, dental, disability, life retirement. You’re just not going to get that stuff if you’re an independent contractor. Why would you be an independent contractor if you’re not going to get any of those things? Well, I guess it would come down to compensation. You should make more theoretically as an independent contractor to kind of offset not getting all those benefits. If you’re going to have a hundred thousand dollars offer from an employer when you’re going to be an employee. And they’re offering you all those benefits. And then they will offer you a hundred thousand dollars to be an independent contractor and not provide any of those benefits. It’s just not as good of an offer. 

Why Employees Would Prefer You To Become Independent Contractors

For most independent contractors, you’d create an LLC. And then you would expense all those things, but it’s also much more difficult to get any of the ancillary benefits when you’re completely on your own. Like, it’s very hard to find health, vision, dental, you can’t find disability, you can’t get life insurance obviously, and you must also pay for your own things. The reason why, I mean, this is just the honest reason why most employers would pay as an independent contractor versus an employer or an employee is they don’t have to pay employment tax.

Employment tax is usually somewhere between 8% to 12%. So, they’re saving 12% on what your compensation is each year. They’re essentially treating you as an employee. They tell you where to go, how much you’re working, who to see, and so you’re a quasi-employee, and the employer is just trying not to pay employment tax.

The IRS lists a 20-factor test on kind of an analysis of if someone is an employee or an independent contractor. So, maybe look at that and say, alright, look, you’re not giving me or any of the benefits of being an employee, but you require me to do all the things that an employee would normally do. 

When Does Being an Independent Contractor More Beneficial?

Being an independent contractor will make sense if it’s more of like a side gig. So, maybe you’re just doing moonlighting work for somebody. And it’s up to you how often you’re working. That would make sense to be an independent contractor. But if this is like a full-time job where you’re going in five days a week, and you’re interacting with the vet tech, the front office, and all the patients and all that kind of thing, it’s unlikely that you’re an actual independent contractor and it doesn’t make a lot of sense.

Overall, most of the time, it would make the most sense to be an employee, so you’d get a W2. It wouldn’t make sense to get a 1099 and be an independent contractor, for it’s for a full-time job. Opinions on that may vary, but I just find overall, most of the time, if an employer is offering an independent contractor position, they’re not actually an independent contractor.

Other Blogs Of Interest

• Veterinary Independent Contractor Agreements
• Veterinarian Independent Contractor Tax Deductions
• Pros and Cons of Employment at a Corporate Veterinary Office

Veterinarian Independent Contractor Tax Deductions

What tax deductions can veterinary associates make if they are classified as independent contractors? First, if you are an employee of a veterinary practice, you’ll receive W2 at the end of the year. And taxes will be withheld from your regularly scheduled paychecks. If you’re an independent contractor, you’ll receive a 1099 at the end of the year. No taxes will be withheld from your compensation. You will be responsible for paying all those taxes to the state. What benefits do independent contractors get? Well, it makes the most sense to be an independent contractor working part-time for an employer or a care center owner. For instance, maybe you’re in an emergency veterinary care business, and you’re only going to work maybe one or two weekends a month.

Income Deduction for Practice Expenses

In that situation, being an employee doesn’t really make sense. It makes more sense to be independent contractors. As an employee, you will have ancillary benefits coverage in your contract. The veterinary practice should pay for your licensing, DEA registration, continuing education reimbursement, signing bonus, and moving expenses if you’re moving from out of state. And then they’re also going to offer health, vision, dental, disability, and life retirement. The employer will cover all those things. Whereas for independent contractors, none of those things will be covered. These veterinarians are responsible for paying for all of that themselves.  Now, does that mean they are at a disadvantage compensation-wise? Well, no, if you do the, I guess, correct things, and the correct things would be independent contractors need to create an LLC.

You need to meet with an accountant to kind of go over the best way to maximize your tax deductions. You need to get an EIN from the IRS, create a bank account, and run all the compensation expenses through that bank account so you can track them appropriately. Those are the things independent contractors need to do to ensure they’re setting themselves up to take the tax deductions when they’re ultimately filing taxes at the end of the year. 

What are those things you can do? Alright, well, all the things I just discussed can be used as tax deductions: 

• Your license
• DEA
• CE
• Any business expenses
• Your home office
• Travel
• Malpractice insurance policy
• Licensing Board
• Defense Insurance

You could depreciate other assets if you have them for the business. All those things can be used as tax deductions when people decide to be independent contractors.

Benefits and Others Not Covered 

Now, a couple of considerations: for 1099 independent contractors, the employer will not have to pay any employment tax on them. So, they usually save around 10 to 12% of their total compensation, which they don’t state upfront. They also do not have to spend any money on the benefits, which can sometimes be costly. If you work as an independent contractor for somebody, you should expect to make a little bit more because the employer is saving on all of those things. If you’re making the exact same amount as some people who work as an employee for a practice, you’re missing out. You should have at least some leverage and point out to them all the things they’re saving on for you to increase. Now, how much? It depends.

I mean, probably somewhere between 5% to 15% of a bump over some people who work as employees would make financial sense for the employer. But whether they’re willing to do that or not, I can’t tell you, but everything is in negotiation. If given an agreement, those are certain things independent contractors can push for because the employer is saving when classifying them as such. I know I mentioned this, but I’m just going to drive it home. 

Veterinarians should meet with an accountant before signing any independent contractor agreement. You need to have the business structures and resources set up properly in advance and know exactly what you can and can’t deduct at the end of the year, which you should run through the bank account. It makes no sense just to sign an agreement and start without having any of those things in place. You could miss out on detecting a lot of valuable business expenses. Email us if you need help with these things. 

Can a Non Compete be Enforced on a 1099 Employee?

Can a non-compete be enforced against a 1099 independent contractor? If you are a 1099, that means you are an independent contractor. Taxes will not be taken out of whatever your payment is. And then at the end of the year, you’ll get a 1099, and you’re responsible for all the taxes associated with any of your compensation throughout the year. Let’s just start at that basic level. If you are an employee, you’ll get a W-2, and you are not an independent contractor. In any employment agreement and most independent contractor agreements for professionals who are in sales or maybe at the executive level, and certainly in healthcare, there will be non-compete.

What Does Non-Compete Do in Work Agreements?

Now, what does a non-compete do? It essentially prohibits the professional from doing what they do for a certain amount of time within a specific geographic region. Are non-competes enforceable in every single state? No, there are a few states where they’re completely unenforceable. However, in most states, they are enforceable if they kind of meet that state’s requirements. Most states do not have specific laws about non-competes, it’s kind of through case law from people suing, and then the court’s making decisions. But the courts will look at the following factors to determine if the non-compete is reasonable and enforceable. 

First, does the non-compete protect the employer’s legitimate business interests? Does it cause undue hardship for the employee/contractor? It doesn’t harm the public and has a reasonable time or geographic scope associated with it.

Can You Enforce Non-competition Agreements?

Let’s talk about what to expect in the actual independent contractor agreement. First, can a non-compete be enforced in a 1099 independent contractor agreement? Yes, they can, unless it’s in a state where, as I said before, it’s completely unenforceable. In most non-compete, it’s going to state that the professional can’t do their specific profession for usually somewhere between a one-to-two-year time. And then the geographic scope really can be dramatically different based upon the industry that the professional is in. For healthcare, somewhere between 5 to 15 miles is normal. For some sales positions, it can be the entire state or several Counties from where they are called upon with the sales targets. It really is industry specific. 

Top Tip: Make Independent Contractor Agreement Specific

Some things you must keep in mind: one, you want to make sure that the specific profession listed is very narrowly tailored. Let’s just say you’re a software salesperson. You don’t want it to say you can’t do sales for two years within this County. You wanted to say you can’t do the very specific software banking sales. That way, you’re not completely kept from doing sales. You just can’t do sales for a competitor.

That’s kind of an important part of this. If an employer is stating you can’t do sales at all and they’re a bank, it doesn’t make sense if you’re doing cleaning supply sales that they would prohibit you from doing that. That’s the first thing you need to think about, narrowly tailored the scope of what you can’t do. And then, as far as time goes, anywhere between one to two years would normally be enforceable. If you have a five-year, 10-year non-compete, that’s ridiculous!

Very unlikely that that would be enforced. And then, as far as geographic scope, you want that narrowly tailored as well. Some things to think about: you always want it to be from your primary location. If you’re in healthcare, certainly your primary practice location. If you’re in sales, you want to keep that as tight as possible and maybe just one County, or if you’re throughout the state, it’s tougher, but still, you want to open as much area as possible. Multi-State non-competes generally are not enforced. However, if you’re in sales and you’re in Cincinnati, and you’re on the border of Ohio, Kentucky, and Indiana, well, they may say somewhere around there. And so, like that, it would likely be enforced as well.

Summary: Non-Compete Could Be Enforceable to Independent Contractors

So, are non-competes enforceable in 1099? Yes, if they are reasonable in scope. It’s tough. I mean, non-competes can be a huge part of any contract negotiation. Now, for some people, it doesn’t matter at all. If I have a physician moving into a city just for that job, they have no ties to the area, and they say, you know what, if this job doesn’t work out, I’m moving anyway. I don’t care about the non-compete at all.

Whereas someone who is established in the city may have kids in school or family close by, being able to stay in the area and continue to do the profession might be the absolute, most important thing. So, suppose an employer/independent contractor customer is completely unwilling to make any changes to the non-compete. In that case, that can be a deal-breaker for some people. Unfortunately, the non-compete can be enforced in an independent contractor agreement but must be narrowly tailored.

I would have someone look it over. An attorney looks it over to give you their opinion on whether it’s enforceable and never go into a contract signing something, just saying, well, it’s too broad. It won’t be enforced if need be. Yes, that might be true, but you might have to litigate it or go to arbitration. I would never suggest that someone sign a contract just thinking, ah, well, it won’t be enforced. I don’t have to worry about it. That’s a bad idea, in my opinion.

Veterinary Contract: How is Veterinarian Production Calculated?

The ProSal method is used in the veterinary industry, which takes a percentage of the collection. So, whatever the practice received that is specific to the veterinarian’s personally performed services, the vet will get a percentage of that. Many are just on straight-based salary, so there is no productivity necessary or at least they don’t get paid more for seeing more patients. Let’s just take a net-collections percentage and talk about that. As I said before, if you’re on a productivity-based compensation model, there are two ways of doing it, at least as far as most vets go.

Veterinarians Calculate Production Based on Pure net-collections

One would just be pure net-collections, meaning, you only get a percentage of what the practice receives from your services. And almost all those agreements will have a fee schedule. These are the things that you can bill for. And then these are the other things that will not count towards yours. Maybe like any food that’s bought from one of your patients would just go to the practice and not be attributed to you or maybe ongoing prescriptions after the first one.

You need to look into that, obviously, that varies based upon the specialty, but they’re usually very specific about the services that count towards the collections of the vet. If you’re on pure net-collections and you’ll get a percentage of what comes in, and then that’s what you get paid. Usually, it’s monthly. They would just do an inventory of what the practice received that month. Then the percentage would be taken. And then that’s what the vet would get. 

Veterinarian Production Based on Draw

Another way of doing it would be they would have draw. Let’s just say they made 120,000 a year, so it’s 10,000 a month, they would say any of the net-collections received above 10,000 a month after you reached your salary threshold, then you would get, I mean for vets, 18 percent is kind of a standard amount. Then you get 18 percent of any of the collections received monthly above 10,000 a month. Or maybe they would do it quarterly. Then you’d get the 10,000, 10,000, 10,000, and then they would take any amounts received over the 30,000, and then you’d get 18 percent of what those net-collections are. 

In that model, usually, if you have a negative balance, meaning, you didn’t bring in 10,000 per month, that negative balance would be carried forward. And if you’re only generating 10,000 a month, you’re getting paid 10,000 a month, something is very wrong as far as the practice goes. Normally, somewhere between like 35 to 40 percent of the revenues generated by a provider would go to the provider. The rest contributes to overhead. That’s kind of the normal productivity model. Veterinarians don’t generally use just encounters or RVUs. It’s just usually a straight net-collections base. Now, a couple of things you need to think about if you’re injured handing an offer would be, especially in the vet industry lately, just a lack of staffing. 

Do They Have Enough Staff?

So, do they have an appropriate amount of vet techs to assist the vet in providing quick and efficient care? I know many vets who must do everything. They have to room the patients; they have to do the initial assessments and everything that a vet tech normally would do. Do they have to do that daily and care for the animal. And that makes the vet less efficient. You need to make sure that they are staffed appropriately and that they are efficient. That way, it doesn’t affect you if you are on one of these productivity-based models. 

If you’re entertaining a new job and the employer is not explicit about what they’re going to do to ensure they’re appropriately staffed. Or is wishy-washy as far as, oh yes, we’ve had problems. Still, you need hard data to determine if a job is worth taking or not. And if an employer is unwilling to give you any of that, you need to move on. You need to find a better opportunity. I don’t know if sneaky is the right word for places that are secretive about their numbers, staffing, or anything like that. That is a huge red flag. And that would be someplace that you’d most likely want to avoid. 

From a Lawyer to a Veterinarian

I think the vet industry is probably simpler than some of the others because it’s usually just a straight base net collection, pure net-collections, or a hybrid of that. And I mean, in my opinion, it is easy to understand, but you need to make certain that the negative balance part is usually the biggest concern for most vets. 

You need to make certain how much you’re at risk of a negative balance carrying forward. And especially, this is the most important thing in this blog, if you’re joining a practice and your net-collections from the very beginning and they’re carrying forward negative balances and again, if you make 120,000 a year, if you’re just establishing a patient base, it will take your time to get up to speed. And whatever that threshold is, you may carry a negative balance forward, and you might be in the hole, tens of thousands of dollars in the first couple of months. 

You want to make certain that there’s like a guaranteed base draw that won’t be held against you for those first few months while you’re building up a practice. Usually, it takes 12 to 18 months for practice to reach maturity. Now, if you’re coming in and replacing a vet, that’s just left. Well, obviously, you have an established base. Therefore, it’ll kind of get you up to speed quicker, but if you’re just building from scratch and you’re on pure net-collections, it’s going to be lean in the first few months.

How is a Veterinarian Given a Draw in a Contract?

What is a draw in a veterinary associate employment contract? A draw is related to compensation. It means how much money a veterinarian will make each month. Let’s talk about the different compensation models and when a draw would come into play. Usually, the veterinarian would have a guaranteed base for at least the first year or two of their contract. It’s very unlikely that you would come into a new employment opportunity and have straight productivity. In the veterinary arena, compensation is almost always calculated through net-collections. Net collections are any money the practice receives determined for the vet’s personally performed services.

Whatever they collect, that’s what would be considered in calculating net-collections for that vet. And one common way of doing it is to say you have a one-year guarantee, and they do that because it takes time to build up a veterinary practice. Now, I guess it depends upon what specialty you’re in, but for the most part, let’s say you’re a general vet. You’re not just going to hop into new practice and have an immediate client base. It takes a while to build up. So, they’ll give you a guaranteed base in year one. Then after year one, they’ll probably switch you to productivity/net collections model. And that’s when a draw would come into play. The veterinary industry utilizes the ProSal method commonly. And it’s a methodology for a veterinary practice to pay their employees, which allows them at least a small profit margin.

ProSal Method

And in that method, they will take an estimated projection of what your net-collections would be, based on different factors and conditions or information from past years. The vet would then receive a smaller percentage of that per month. And then there would be a reconciliation or true up at the end of the year. Let’s go through some examples. Let’s say the veterinarian makes 120,000 per year in their first guaranteed base year. And then they collected that amount as well.

While under ProSal, they would maybe knock it back to 80 percent. You would make 10,000 in that scenario per month. And so, they would say, alright, what will knock it back to 80 percent? And then the vet will get a draw of $8,000 per month. Throughout the year, they’ll make 8,000 per month. And then, at the end of the year, they will take whatever the total net-collections were for that vet versus what was paid out.

In that scenario, 8,000 times 12 minus 6,000. And then if there is a difference, meaning, if they collected more, they would then get a percentage of those net-collections. The downside is if you are in a negative balance, meaning, if you collected less than they paid out, they would generally make you pay that back over time. And what they’ll normally do is they’ll take however much you’re in the deficit for. Let’s say it’s $6,000. Over the subsequent three pay periods, they might take 2000 out of your paycheck until you’re back to zero. Is that fair? It just depends. No one wants to employ employees who don’t cover their salary and expenses. If the vet is entirely unproductive, they can expect a termination letter.

Veterinary Contract Production Compensation

Now, if there are some underlying reasons why a vet is not as productive, this is big in the vet industry right now due to lack of staffing. If you can’t get the vet techs, if you can’t get the front office staff if they can’t have any efficient workflow, and the vet is doing all the things that they didn’t have to do before, that will slow them down, and their collections are going to decrease. Just a side note: you need to make sure there’s language in your employment agreement that states the veterinary practice will provide you with proper support to make your practice efficient. 

Back to the draw, it could change over time. Let’s say you had a 120 base, then you moved into a kind of a decreased percentage per month as your draw, and then you collected 160,000. Well, they would probably bump up your draw to 120,000 and then do another reconciliation at the end of a year. There are many different ways to calculate compensation in a veterinary associate contract, but that’s probably the most common way to productivity. I also find that many vets are just paid a straight base for years one to five. And that makes it simple, to be honest.

Pros and Cons of Employment at a Corporate Veterinary Office

What are the pros and cons of a veterinarian working in more of a corporate clinic setting? First, are you working as an employee or 1099 independent contractor? When working for a corporation, there are a lot of pros. Starting with the benefits typically offered, such as health insurance, retirement, disability, life insurance, sometimes travel, and cell phones. The list just goes on from there. More benefits will be offered to you in a more corporate clinic. Also, the facilities are typically more standardized. If there’s more than one location that you’re going to be providing services at, typically, they’re standard between the locations. And then also support staff. Usually, you’re fully staffed with the people you need and the equipment within the facilities.

Salary Talks, Corporate Practice or Solo?

So, this is great. You’ve got benefits, the facilities are great. Sometimes the pay can be more in a corporate setting. I would say often. You are typically compensated more. Those are just kind of the pros, depending on what you’re looking for. Suppose you’re looking for benefits (which will be provided with any W2 position). In that case, if you’re looking for things that are more standardized policies, also with admin, then that’s considered a pro for a corporate clinic. 

Some cons you want to think about are you’re normally not able to negotiate quite as much in an employment contract. When starting your employment with them, it’s typically offered the same sort of agreement for all the other similarly situated veterinarians. Also, you want to think about your compensation. That is one thing that you can sometimes negotiate in a corporate clinic. 

Other Important Cons

Some other cons and probably the biggest one. Well, I would say there are probably two. One, there are usually a lot of expectations for how many clients you will see in their animals per day. There are quotas, there are maximums, and there are minimum expectations that you must meet. And if you’re not meeting those, there are consequences to those. That’s something that you want to consider if that’s something that you feel up to. I would say another con is usually the non-compete clauses. They are extensive. There will probably be multiple locations, large miles from each location that you will be restricted to. Also, be careful if you are working as an independent contractor that the agreement does not contain a non-compete clause.

And then, usually, for an extended period, the biggest con of a corporate clinic is those non-compete clauses. Because those can come back to bite you. Going back to the pros, I would say another pro would probably be just marketing and advertising. They’re marketing and advertising on your behalf. They’re bringing in tons of clients and their pets, so there’s no worry that you will have that client base there. It’s easy to build up because you have them supporting you in this setting. 

Veterinary Clinic Contract and Benefits

How should you negotiate a veterinary associate contract? There are many things to consider when you want to negotiate your contract or an employment agreement. The first thing you want to understand is how much leverage do you have and what I mean by leverage. I mean, are you just out of your schooling? Do you have any experience? Are you specialized? If you’re specialized and very few are in the veterinary industry, you have more leverage. But you might have a little less leverage if you’re just out of school for general veterinary practice. And then also, if you’ve been practicing and you have a substantial client base, and you have lots of years of experience, you may have more leverage in relation to that.

Once you understand your leverage, you need to understand what you should be asking for. The first thing I always see our clients want to negotiate is their base salary. Base salary or base compensation is the flat you’ll get every month upon continuing your employment. The problem is that veterinarians are normally compensated, not just through base compensation. You’re also normally compensated through collections. That’s the typical sort of layout of compensation for really any type of veterinarian. Even if you’re specialized, it’s normally base compensation, and then there’s a part of collections. 

Base Compensation is Not Everything

So yes, the base compensation is important, but there are many other aspects to an employment agreement. Your percentage of collections can be huge. You want to fight probably for a larger percentage of collections over just a base salary because the base salary will never change unless you renegotiate in the future. But suppose you have a substantial client base, and you know you will bring those clients in. In that case, you will want a higher percentage of your collections which you can make well over your base salary. It’s something to consider. I know the base salary is a significant number on an employment agreement. Still, you also want to consider the collection percentage. Because you can make a lot more money with a higher collection percentage if you know you will bring in those clients.

Clinical Office Work Pros and Cons

Now, if you are right out of school and you do not have an established client base, and maybe you’re not replacing someone at a veterinary practice or clinic, they’re just expanding. It will take a while to build up that client base. Then you, in that situation, might want to fight for a higher base compensation or salary for a year or two so that you can establish, as I said, that nice client base. Other things that can be more detrimental to you than even the compensation are those restrictive covenants. And what I mean by restrictive covenants are non-compete clauses and non-solicitation clauses, specifically the non-compete. Right now, the veterinary industry is booming, and practices that are bringing on and employing veterinarians are protecting their interests.

Look Out For The Non Competes

And so, sometimes, these non-competes can be unreasonable and attach to many locations or just many miles from one practice. So, you want to consider that because if you are establishing a client base, you’re working hard, you’re bringing in clients, and then you decide to leave the practice, or they decide to terminate their employment with you, you could have a serious problem. You might not be able to practice in the area. You could even have to up and move your family. Non-compete clauses are extremely important that you want to negotiate in your initial employment agreement. And often, it’s overlooked because it’s something way in the future. And you’re excited about this prospective future employer, or you’re right out of school and want to start earning money.

That’s what you’re focused on, but non-competes are those sneaky clauses in employment agreements that can hurt you in the future. I would say more than anything. A non-compete agreement is something that you should always negotiate. They’re normally a mileage from specific locations that you can negotiate. And then also, for a specific period, they can be anywhere from six months to three years. And I would always try to negotiate that amount of time down and then always the miles down. When you’re negotiating how many miles, you also need to consider, can you find work outside of that restricted area without having to up and move? And then you also want to know what’s restricted. Sometimes the non-compete clauses specifically for veterinarians may just say that the practice of veterinary medicine is very general. I will negotiate that it’s only within your specialty if you’re specialized.

Business Non-Compete

So, non-compete clauses want to negotiate those, most important. Non-solicitation clauses just mean you can’t solicit clients or employees coming with you. And sometimes that period can be negotiated down to six months or a year before you can reach out directly to those clients or to those employees. Then you have your sort of ancillary benefits. In your continuing education, typically you’re given an allowance every year, which is anywhere from 2,000 to 4,000 typically within a veterinary practice. You can negotiate that money because if you don’t, then you must pay for your continuing education to keep your license. So, that’s something I would negotiate as well. And then also any sort of dues, fees, licensing, all those costs really add up.

And we don’t think about that when we’re just looking at the base salary and how much money you’re going to make, but these sorts of costs can be negotiated at the beginning. It’s really going to save you a lot of money in the end, and a lot of headaches as well. 

Breaking a Corporate Clinic Contract

Can a veterinarian break an employment contract? I think the most important matter is defining what break means. Do you mean, can I terminate the contract, meaning get out of it if I’ve already signed it and have started? Yes, that’s one way to think of breaking the contract. In my mind, breaking a contract usually means you’ve signed the agreement but haven’t started yet. But we’ll kind of look at both of those. Let’s talk about the first one first. Can you break a contract? In any employment agreement, there’s going to be language about how to terminate the agreement. And there are generally four ways to terminate an agreement.

You can do it if the term expires, then there’s no automatic renewal, so let’s say you have a two-year contract, get through the two years, neither party has renegotiated an extension, the contract ends, it’s terminated. Next, by mutual agreement. If either party is like, you know what? This isn’t working out. Let’s move on. The contract can end. The third would be for cause termination.

If one party is in breach of contract and doesn’t fix the breach, then they will have the option of terminating the contract immediately. And then the last way would be without cause termination. And that just means either party can terminate the agreement at any time, for any reason, with a certain amount of notice to the other party. In the veterinary industry, somewhere between 30 to 90 days is kind of a standard amount for without cause termination. Just because you’re utilizing one of those four ways of terminating a contract doesn’t necessarily mean you’re breaking it.