Red Flags in a Veterinary Associate Contract | Association Between Red Flags and Bad Management

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 are some things you need to think about as far as what could make an agreement maybe not such a great opportunity? First, compensation clearly is usually the number one thing in most people’s minds. With veterinarians, a lot of them will use the Pro Sal method which involves a percentage of the net collections that the practice receives based upon your personally produced services or there’s usually some kind of hybrid where you’ll get a base plus a percentage of what the net collections are.

But negative balances in that situation can be moved forward. Let’s kind of dive into that quickly. First, 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 many times it is. And so, 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 collections-based method, your volume and how many clients you see, and how much you do per day are going to directly affect how much money you make annually. 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, 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, monetarily 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.

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

Veterinary Red Flags With New Notice Requirements

Well, I find that the contracts that have no ability to terminate the agreement without cause usually mean that that employer has had a very difficult time staffing and they’re wanting 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 absolutely need without cause termination in the contract. 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. 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 basically 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, obviously 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 all the way up to 20. You want to make sure 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. 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, for some people, they 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 absolutely need to make sure 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.

Real Time Negotiation Strategies 

How should you negotiate a veterinary associate contract? There are lots of things to consider when you want to negotiate your contract or what we call an employment agreement. The first thing you want to understand is how much leverage do you have and what I mean leverage, I mean, are you just out of your schooling? Do you have any experience? Are you specialized? If you’re specialized and there are very few of you in the veterinary industry, then you have more leverage. But if you’re just out of school for general veterinary practice, you might have a little less leverage. And then also, if you’ve been practicing and you have a substantial client base and you have lots of years of experience, then 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. 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’re going to get every month upon continuing your employment. The problem with this is normally how veterinarians are compensated is not only just through their 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. 

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’s going to take you 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, but specifically the non-compete. Right now, the veterinary industry is booming and practices that are 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 really 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 a lot of times, 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 you really want to start earning money.

And so, that’s what you’re really focused on, but non-competes are those sneaky clauses in employment agreements that can really 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, which is very general, and if you’re specialized, I would negotiate that it’s only within your specialty.

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. 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. And then it’s really going to save you a lot of money in the end, and a lot of headaches as well. 

Association Between Long Notice and a Big Red Flag

What needs to be in a termination letter for a veterinarian who’s employed at a veterinary practice? The short answer is it needs to be direct and really doesn’t actually need to include too much. To start off 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.

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 and it’s going to 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 does state that you have to mail in 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, all it should state is that you are terminating your employment, this is you 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 really 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.

Have a Lawyer Review Every Contract

Your eyes might get big when you see some of the benefits you can get just from signing off on your professional contract. However, before you get too excited about all that is contained within the contract, please consider having a veterinary contract lawyer look it over. Your lawyer can review each aspect of your contract to see if elements need to be revised before you sign off. They can also inform you about anything within your contract that you do not understand. 

A complete review of your contract will cost you some money, but that is money well spent! Most contracts offered to veterinarians are fair and reasonable, but there are cases when a contract should be rejected due to unreasonable expectations. To make sure you don’t end up signing up to work in a situation that you can’t stand, you should contact us and let us get to work, helping you figure out if the contract you are presented with is worth signing.