Red Flags in a Dentist Employment Contract: Dental Employment Agreement Concerns
Dental associate contract red flags. There are obviously dozens of red flags in a contract. However, there are a handful that are necessary to take a solid look at and we’ll kind of go over those. The first thing would be no without cause termination. In any dental associate employment contract, there’s going to be a section called term, which just means how long the contract is, and then termination, how the contract can be terminated. Contracts can be terminated in several ways. The term could just end, and it’s not renewed, it could be terminated by mutual agreement, it could be terminated for cause. If one of the parties breaches the contract, doesn’t fix the breach, the other party generally has the option to immediately terminate the contract. And then the last and most important way is without cause termination.
This just simply means that either party can terminate the agreement at any time with a certain amount of notice to the other. Normally, somewhere between 30 to 90 days. The reason why this is important, and I find this especially important for dental associates for whatever reason. Without the ability to terminate the contract at any time, let’s just say the dental associate has a two-year contract and they cannot terminate without cause, you’re essentially stuck there for two years unless the other party breaches the contract.
Dental Associate Employment Agreement Red Flags
There are plenty of scenarios where if a dentist associate is on net collections, volume, compensation, the owner will generally, I’d say, overestimate what the associate will make. And so, they can get into a job if they’re not paid a daily rate or a salary, it’s more of just eat what you kill and get a percentage of whatever is collected and the volume simply isn’t there and you’re not making nearly as much as you expected.
You still would have to play out the rest of those two years. And that is a situation no one wants to be in. So, first thing, absolutely makes certain there’s without cause termination at any time. Sometimes, the employer will try to say, you can’t give notice in the first year or you can’t give notice in the first six months or whatever. No, anytime, if you start, you give notice, you do your, whatever the notice period is, move on. Absolutely necessary. Two, compensation. If you are a dentist and you are being paid on either net collections, encounters, some kind of volume metric and you are not 100% certain that the volume is there for you, you need to be very careful about taking that job.
Dental Associate Contract Compensation
A daily rate or a base salary, especially in the first year or two insulates the dental associate from just getting completely screwed by an employer that is, I guess, unwilling to make income guarantee and then is bringing in a dentist, but in that circumstance, only pay them based upon a volume metric. Just like in the example I just gave, if a dentist starts and their compensation is based purely on production and the production is completely out of their hands, they’re not doing the marketing, it is on the employer to drive the business, it’s a problem. What amount draw they receive should also be a consideration.
So, for anyone who’s new, maybe just out of training or you’re relatively new, it’s important to have guaranteed salary or daily rate. And then once you’re there and maybe you’ve been there a year or two, and you see that the volume is there, maybe potentially you can make more under collections model, well then, talk to the owner about switching. But at the very beginning, I find most places that try to lure dental associates in with big numbers. It almost never shakes out that way. Another big red flag is the non-compete. This is one thing that varies from state to state. Each state kind of has its own view on what’s a reasonable non-compete.
Employment Contract for Dentists and Non-Competes
Non-competes are enforceable, and almost every state, California, New Mexico, and Massachusetts are three of the few states where they’re completely unenforceable.
But for most states, it must be a reasonable length, usually about 12 months, sometimes they’ll try to do two years and then some kind of reasonable geographic restrictions. Usually somewhere between 5 to 15 miles. If you have a five-year, 50-mile non-compete, that’s crazy! You don’t want to sign something like that. You want it to be no more than a year, and then no more than, I would prefer 10 miles from your primary practice location. Many of these big corporate dental offices have multiple locations in the area and will state it’s 10 miles or whatever the geographic restriction is from every place they own even if the dental associate didn’t provide care or work in that location. No, you can’t agree with that. It needs to state that it will only apply to the locations where the dentist provided care and even then, try to limit it to no more than two locations. In big cities, obviously, corporate dental conglomerates continue to gobble up some of the dentist owned practices.
And so, if someone is 10 locations in a city and it’s 10 miles from 10 locations, you’re going to be knocked out of your city. So, what’s in the non-compete is certainly important. And then last and I’ll just touch on this briefly, the benefits. If a dental associate is an employee, the employer should pay for your license, DEA registration, and continuing education. If you’re moving from out of state, reasonable moving expenses, and reimbursement are normal things that an employer should pay for. So, think about that as well.
Negotiating Employment Agreements with a Practice
How to Negotiate a Dental Associate Contract? I will give some tips and tricks on how to get a better contract. First, there is a difference between negotiating a contract with somebody just coming out of training versus someone who’s been established in a community for a while. You simply have more leverage if you are in any community and either your practice is being brought out by a corporate practice or another group wants you to join them, and you have an established patient base. Let’s first talk about those coming out of training. What do you need to do to put yourself in the best position to negotiate a contract? Well, you need to know what’s important.
For most dentists, the most important things are obviously compensation, is it a base salary? Is it a daily rate? Is it net collection? How do you terminate the contract? Are you able to get out of it with a certain amount of notice or the benefits, do they pay for your license, DEA registration, credentialing, any kind of continuing education, and then are there signing bonuses, and relocation assistance? Do you have to pay them back if you leave within a certain amount of time? And then probably the two highest priorities are who pays for malpractice insurance, who must pay for tail insurance after the contract terminates, if it’s claims made policy, and then lastly, the non-compete. For some people, this is the absolute, most important thing in the contract. If they’re tied to a community, kids in school, family, they absolutely can’t leave, then you need a reasonable non-compete that’s not going to make you must move completely out of the area.
Alright, those are the things that are most important to most dental associates. Now, you’re coming on training, you have a job offer, they’re giving you a certain amount. How do you know what’s reasonable and what’s not? Well, the best place to find out that information is to talk to your classmates. What are the offers they’re getting? How much are they getting? How are they structured? Where is the job offers coming from? That’s the best and most, I would say, accurate means of finding out what the going rate is at that time. The compensation is going to vary wildly. As I said before, is it a base salary? Is at a daily rate. Is there some kind of net collection involved? Is it a hybrid? Could it be half base, half net collections?
Many times, compensation for a job may look great, but then the benefits are bad or they’re not paying for your tail insurance or the non-compete is terrible. So, you can’t just take compensation as the number one factor in determining what is a good opportunity, but it certainly is important. Knowing whether a non-compete is fair or not is something you probably must talk to a professional about. For the most part, anywhere between one to two years, and then maybe 5 to 15 miles from your primary practice location would be considered reasonable. If you’re in a non-compete that’s more than two years or it knocks out like multiple counties or maybe they’ve attached the non-compete radius to, let’s say, it’s a corporate practice in a big city and they have 10 locations.
Non Compete Language in Contracts
And they’re saying, well, you can’t work within 10 miles of every location we own. That’s not a reasonable non-compete. The actual negotiation will depend on two things. One, do they give you an offer letter, or do they just give you the employment agreement? If they give you an offer letter, they’re going to expect that those terms are going to be negotiated in advance and then incorporated into the employment agreement. And then, they’re going to give you the employment agreement. I find sometimes it’s difficult to come to terms with the main parts of an offer letter without seeing the full employment agreement. I mean, if I had a perfect scenario, there would be no offer letter. They would just give the employment agreement. Then you’d have kind of a full understanding of what the job entails and what the expectations are for both parties.
You could agree to a salary, you could agree to the length of the term, that there is a non-compete, that the things they’ll pay for, but when you see the specific language in the contract, it could greatly change the way you look at the value of the contract. Just because you’ve signed an offer letter doesn’t mean that you can’t renegotiate those terms if you provide proper context to the employer. Alright, I was okay with making $110,000 a year and base salary, not knowing that the non-compete effectively knocks me out of the entire state. If you want me to sign this contract with that non-compete, then I need 130,000 or something like that. There are many ways of going back and forth. Some employers will just simply say, this is a take-it or leave-it. I would be wary of signing a contract with an organization that’s unwilling to make any changes at all in the contract.
It usually means they’re difficult to work with down the road or a very rigid and kind of unprofessional environment. So, if you find that someone just says, take it or leave it, I would leave it and move on and try to find a better opportunity. I’m just telling you, if they take the mindset that they’re not going to change anything in the contract, like nothing at all, no change at signing bonus, relocation assistance, benefits, anything like that, it is a bad sign moving forward. And then one more thing to think about and absolutely should be top of mind when you’re signing a contract or negotiating the terms of an agreement: every employment contract should have what’s called without cause termination. Either party should have the ability to terminate the agreement at any time with a certain amount of notice to the other party.
Usually, somewhere between 30 to 90 days. If your contract does not have without cause termination, meaning, you must fulfill the entire initial term of the agreement somewhere between one to three years, normally, it is an enormous red flag. You absolutely should not sign that contract for this reason. If they have excluded without cause termination, which is essentially standard across all healthcare professions, it usually means they’ve had a ton of turnover or they’ve had some very dissatisfied dentists that have wanted to leave. So, they’ve removed that ability and made sure that they must stay there for a three-year period or a two-year period or whatever. If it’s not in the contract, that’s why it’s normally not in there because they’ve had a ton of turnover and the turnover is normally due to bad management. It’s either it’s a toxic work environment, or the compensation is not worth the amount of time or effort you’ve, you’ve had to put into it.
The Need for Without Cause in an Employment Agreement
Absolutely makes sense there’s always without cause termination and the employment agreement. Don’t feel bad about asking for things. If you’re negotiating the terms of employment, most smart employers expect there’s going to be some back and forth. Ask for a little more salary, a little more bonus, and a little less non-compete radius. Like incremental things that you can get changed in the agreement can make kind of a big change in the value of an opportunity. So, don’t feel bad. Now, obviously, if they’re offering a hundred and you ask for 300 or some crazy amount, they’re going to just think that you have no idea what’s going on. They’ll probably move on. When you ask for something, it needs to be reasonable. How do you find out what’s reasonable or not? Once again, talk to your classmates, talk to any mentors, talk to attorneys who understand what they’re doing, and deal with these contracts every day. That’s where you need to get in. But if you go in and ask for these ridiculous changes to an agreement, most places will either just pull the offer just to say, no, we’re not doing any of that. So, that’s how you negotiate a dental associate contract.
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