What is the difference between an offer letter and an employment contract for a dental associate? If you are looking for a new position, the employer may ask you to sign an offer letter, and then they’ll follow up with an employment agreement. That’s standard. Several issues arise when they ask you to sign an offer letter. The first issue is, well, should I negotiate before I sign the offer letter or before I sign the employment agreement? Well, let’s talk about what’s in a normal offer letter.
Normally, in an offer letter, I’ll state the terms of the contract, so how long does it last, the locations where the dental associate will practice, the compensation, and is it just salary? Is it a daily rate? Is it a net collection? Also, professional liability insurance, tail insurance, the non-compete, and maybe some basic benefits. It’ll just be like bullet point terms of, these are the things you’re going to receive, and these are the terms that we’ve agreed to.
Why Should You Negotiate the Terms Before Signing an Offer Letter?
So, you want to negotiate those terms before signing the offer letter if you’re not happy with the offered daily rate, the base salary, or the non-compete. I mean, the offer letter isn’t going to go into much detail about the, the same language in the employment agreement will be much different than what’s in the offer letter.
It may just say there’s a one-year non-compete and not even mention what locations it applies to or the geographic restriction. Or as far as compensation goes, there won’t be any kind discussion about, alright, if I’m on a net-collections agreement, I only get paid a percentage of whatever the practice brings in for my services. If the contract terminates, do I still get all those outstanding collections at the time the contract terminates? These are like the details that won’t be in the offer letter but will be in the employment agreement.
If You Signed an Offer Letter, Is It Binding?
The first question is, is it binding if I sign the offer letter? Well, for the most part, no. Unless it explicitly states this is a binding document, it’s not binding. And I would strongly urge anyone if there was language in an offer letter that states the terms are binding, don’t take that position for this reason: the kind of shallow terms of the basic comp, benefits, and restrictive covenants in the offer letter may look okay, but when you get into the minutia of the employment agreement, it may change substantially.
For instance, the offer letter may say there’s a non-compete like a one year or that lasts for one year. Then it’s maybe a five-mile strict. Well, if they’re a corporate practice and they have 10 locations in a city, and it doesn’t state if it applies to all 10 locations, you may just be thinking, well, it just applies to my location. Well, that’s a problem if you need to stay in a city and then there’s a ten, five-mile restriction instead of one.
That’s the kind of detail where it may look okay in the offer letter, but when you get into the details of the actual agreement, it completely changes things. Or the agreement may state they’ll pay for your professional liability insurance, but there’s no mention of tail insurance and who pays for it. Then you get into the agreement, stating you’re responsible for paying for your tail. And that might not be something that you are okay with. At the surface level, it may look great. And then, when you get into the agreement’s language, it may change.
What Should You Do if the Details of the Offer Have Changed?
What to do in that situation? If you’ve signed an offer letter, you get into the agreement, and the details have changed. Whether it’s a great opportunity, you need to negotiate. Say you’ve negotiated the terms before signing the offer letter. You can still negotiate those same terms after they’ve provided you with the employment agreement. And you need to provide context to the employer about why it was okay at this point. But after looking at the contract details, this position at that compensation is no longer a good deal.
You need to explicitly tell them. This is why I was okay with it at the beginning, but now, I’m not OK with it. I think any intelligent employer will understand you wanted to agree to the offer letter, but it’s still open to negotiation after the fact. If you just come back and say, I want 20,000 more and not explain why. Or not explain the terms in the agreement you’re not comfortable with, they’ll think that you’re unprofessional and potentially greedy. So, you just want to be sure if you’re asking for more. You say, “I know I agreed to the terms before. But I’m asking for this additional amount because of these reasons and list them out.”
If the employer states you are not allowed to renegotiate after you sign the offer letter, that’s not true. They’re just not being truthful with you. They don’t want to renegotiate the terms. If you have an offer letter that you’ve signed, and then you get into the agreement. And they’re pressuring you. They say, these terms are binding, you can’t make any changes now, we need you to sign the employment agreement. Then you must think hard about whether this is a job that you want to pursue.
How Does the Employer Act During Negotiation?
It’s telling the way that an employer acts during the negotiation process. If they’re just iron fist, we’re not negotiating anything. This is take-it or leave-it. You’re sticking yourself to the terms of the offer letter. It usually means they will be difficult to work with down the road. If they’re a little more open-minded or may be willing to make some changes to the agreement. I find those types of people easier to work with, and likely have a good working relationship as you move forward. So, you need to be careful about people giving hard deadlines and strong-arm tactics. They’re trying to press you into signing.
There’s usually a reason for that, which means it’s hard for them to keep dental associates. Or there are a lot of turnovers. You must use the leverage that you have. And if it’s a position that’s hard to fill, there have been a lot of turnovers. Then you do have leverage because they need someone in there. And they want you to get in there as soon as possible. So, you must use the leverage that you have. That’s a rundown of the difference between an offer letter and an employment agreement.
Other Blogs of Interest
- Dental Associate Contract Red Flags
- Can a Dental Associate Break Their Contract?
- How do you Terminate a Dental Associate Contract Without Cause?
How to Negotiate a Dental Associate Contract
I’ll give some tips and tricks to get a better contract. There’s a difference between negotiating a contract with somebody just out of training versus someone already established in a community. You have more leverage if either a corporate practice or another group is bringing out your practice. Or wants you to join them. And you have an established patient base. Suppose you’re coming out of training. What do you need to do to put yourself in the best position to negotiate a contract?
For most dentists, the most important things are salary. Is it a base salary? A daily rate? Is it a net collection? How do you terminate the contract? Can you get out of it with a certain amount of notice or the benefits? Are they paying for your license, DEA registration, credentialing, or continuing education, and are there signing bonuses and relocation assistance? Will you be paying them back if you leave within a certain time? Probably the two highest priorities are: who’s paying malpractice insurance? And who must be paying for tail insurance after the contract terminates if it’s a claims-made policy.
Also the non-compete. This is some people’s absolute, most important thing in the contract. If they’re tied to a community, kids in school, or family, they absolutely can’t leave. Then you need a reasonable non-compete that’s not going to make you move entirely out of the area.
Know The Average Pay in Practice
Those are the most important things to dental associates. Now, you’re coming on training, you have a position offer, they’re giving you a certain financial amount. How do you know what’s reasonable? Talking to your classmates is the best way to find that information. What offers are they getting? How much are they getting and how are they structured? Where do offers come from? That’s the best and most accurate means of finding out what the going rate is at that time. The compensation is going to vary wildly. Is it a base salary? Is it a daily rate? Or is there some net collection involved? Or is it a hybrid? And could it be half base, half net-collections.
Other Things to Consider Beyond Compensation
Often, dental compensation for a job may look great, but the benefits are inadequate. They’re not paying for your tail insurance, or the non-compete is terrible. So, you can’t just take a salary as the number one factor in determining a good opportunity. But it is undoubtedly vital. Knowing whether a non-compete is fair or not is something you probably must talk to a professional about.
Mostly, anywhere between one to two years and 5 to 15 miles from your primary practice location would be 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 10 locations. Say, it’s a corporate practice in a big city having 10 locations. And they’re saying, well, you can’t work within 10 miles of every site 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 give you the employment agreement? If they give you an offer letter, they expect those terms will be negotiated in advance. Then incorporated into the employment agreement. And then, they’re going to give you the employment agreement. Sometimes it’s challenging coming to terms with the main parts of an offer letter without seeing the full employment agreement. If I had a perfect scenario, there would be no offer letter. They would give the employment agreement.
Then you’d completely understand what the work entails and the expectations for both parties. You could agree to a salary, the length of term, that there’s a non-compete, that’s the things they’ll pay for. But when you see the specific language in the contract, it could significantly change the way you look at its value.
You Can Negotiate The Contract Even After Signing the Offer Letter
Just because you’ve signed an offer letter doesn’t mean you can’t renegotiate if you provide proper context to the employer. Alright, I was okay with making $110,000 a year and a base salary. Not knowing the non-compete effectively knocks me out of this state. If you want me to sign this dental contract with that non-compete, I need 130,000. There are many ways of going back and forth. Some employers will just say, this is a take-it or leave-it. I would be wary of signing a contract with an organization unwilling to make any changes in the agreement.
It usually means they’re difficult to work with down the road or have a very rigid and unprofessional environment. So, if you find that someone 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.
Check the Without Cause Termination in the Agreement
One more thing to keep in mind when signing a dental contract or negotiating the terms of an agreement. Every employment contract should have what’s called without-cause termination. Either party should be able to terminate the agreement at any time with a certain amount of notice to the other. Usually, somewhere between 30 to 90 days.
If your contract doesn’t have without-cause termination. It means 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. Suppose they have excluded without-cause termination, which is standard across all healthcare professions. In that case, it usually means they’ve had a ton of turnover or very dissatisfied dentists who wanted to leave. So, they’ve removed that ability and made sure they must stay there for three years, two years, etc.
Usually, it’s not in the contract because they’ve had a ton of turnover and it’s normally due to bad management. Either it’s a toxic work environment. Or the compensation is not worth the amount of period or effort you’ve, you’ve had to put into it. It makes sense that there’s always without-cause termination in the employment agreement.
Talk to Dental Associate Contract Lawyers
Don’t feel bad about asking for things. If you’re negotiating the terms of employment, most smart employers expect there will be some back and forth. Ask for a little more salary, a little more bonus, and a little less non-compete radius. Incremental things you can get changed in the agreement can make a big change in the value of an opportunity. So, don’t feel bad.
Now, if they’re offering a hundred and you ask for 300 or some crazy amount. They’ll think 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, any mentors, or attorneys who understand what they’re doing. Those dealing with these contracts every day. That’s where you need to get in. But if you ask for these ridiculous changes to an agreement, most places will pull the offer and say no. So, that’s how you negotiate an associate contract.
Can a Dental Associate Break Their Contract?
Can you break a dental associate contract? The most crucial thing in this video is what you consider breaking a dental associate employment contract. In my mind, it could be two things, and the analysis of those two things is very different. First, breaking a contract could mean you’ve signed an employment agreement but have decided not to go through with it. And so, in that mind, you can consider it as breaking the contract. And then the second one would be, you’re in a current agreement, and you want to get out of it. Is that considered breaking a contract? The first one, yes, I would consider breaking a contract. The second one is just terminating the agreement, probably not breaking the contract.
Let’s take, for instance, you’ve signed an agreement and don’t want to go through with the job. In that scenario, let’s say you’re in your last year of training. The practice approaches you. And they say, hey, we’d like you to come in, be a dental associate. You negotiate the dental associate contract, sign the agreement, and then something happens, or you don’t want to go through.
It could be a family issue, or a better job opportunity. I mean, several things could make someone not want to go through with it. But how do you handle that scenario? Well, one, it may state in the agreement that if the associate doesn’t start, these are the consequences. And it could be a penalty. They may say there are ‘liquidated damages’ like a monetary amount you must pay because you’re not going to start.
Employment Issues in Dentistry Contracts
It could come after you for recruitment fees or any credentialing fees that they’ve paid to get you credentialed. If they assisted in your licensure, any of those types of things. Breaking the contract, meaning deciding not to start, could open the dental associate to liability. Now, I find most employers fairly understand for a couple of reasons.
If somebody doesn’t want to be there, they won’t force them or make a big stink about them not coming. Now, the longer notice you can provide the employer, the more likely it is it can be an amicable break. Suppose you have an employment contract and you’re supposed to start on July 1st. And on June 30th, you say, oh, by the way, I can’t start. Well, that employer is going to be angry. They may come after you for small damage unless there’s a tremendous excuse.
And when I say come after you, they could sue you. Or if there’s an arbitration clause, they could go to arbitration. If you have more notice, you just need to come to the employer and say, look, the situation has changed. I really apologize for backing out. Due to these reasons, I just can’t start. I appreciate all that you’ve done for me. I was looking forward to starting here, but I’m trying to give you as much notice. You can find someone to replace me. In that scenario, most employers will be understanding and won’t make a big deal out of it. That’s breaking the contract if you’ve signed it and don’t want to start.
Dental Contracts Compensation After a Dentist is Terminated
If you’re in a current employment agreement and want to get out of it. Well, I don’t consider that as breaking the contract. There will be a language in the agreement stating how to get out of the term. Parties can usually terminate a contract in one of four ways. One, there could be a fixed term. It pertains to how long the contract is. There’s no language about renewing. There’s no automatic renewal language in the contract. The term ends, neither party wants to renew it, and the contract terminates.
You could terminate a contract by mutual agreement, meaning, both parties say, you know what, this isn’t working out. We can both get out of it, no harm. That’s it.
The other one would be a breach of contract. If one of the parties is breaching the contract, let’s say the employer isn’t paying on time, or there’s a bonus structure, and they’re not paying the associate the proper amount. In that scenario, the associate would provide written notice to the employer saying you’re in breach of contract. Usually, they’d have a short period to fix the breach, a cure, somewhere between 15 to 30 days. And if they fixed it in that period, you couldn’t terminate the contract for-cause.
The last way, and usually the most common way to terminate a contract is called without-cause termination. Without-cause termination and this is probably what some people may think is breaking a contract. It means any party can terminate the agreement at any time, for any reason, with a certain amount of notice to the other party. For most dental associate contracts, that’ll be somewhere between 30 to 90 days. In that scenario, if the associate wanted to terminate the agreement, they would, in writing, give the employer proper notice.
Dental Associate Agreements
If it was 60 days, they give them 60 days’ notice; they say, per the agreement, here’s my 60 days’ notice, my last day of work will be this, appreciate the opportunity. And that’s it. I guess the only way you could break the contract, meaning be in breach of contract, would be if you gave notice, but it wasn’t enough. If the contract said 60 days and you only gave 30, they could come after you for damages like lost profits, replacement, recruiting fees, and all that type of thing.
Then sometimes, in the agreement, it’ll state that if the associate leaves in a certain amount of time, they’ll have to pay back signing bonuses, relocation assistance, credentialing, licensing, and all those types of fees. So, can you break a contract? Yes, you can break a contract. But there will be repercussions. But for the most part, if your contract has without-cause termination, it gives you options to get out of the agreement at any time.
And if you have a contract that doesn’t have without-cause termination, do not sign that contract. It is an enormous red flag. Normally, that means employers have a very difficult time retaining dental associates. And so, they’re trying to ensure they can’t leave within a certain period. You do not want to be in that position.
Dental Contract Questions?
Contract Review, Termination Issues and more!