What is a Draw in a Dental Contract? | Dental Contract
What is a draw in a dental contract? Most importantly, a draw would be associated with a productivity-based contract. For instance, some dentists, especially dental associates who are relatively new, would get a daily rate or maybe a base salary. But at some point, the compensation will likely switch from an income guarantee into a productivity model involving net-collections percentage. Net collections mean that you will get paid a percentage of whatever the practice collects from your specific services. As far as a dentist’s average rate, I would say anywhere between the high twenties up in the low forties is probably a good standard range.
How Is Draw Calculated in a Dentist’s Contract?
Let’s say. For example, the practice would bring in $50,000 to the dentist’s attributed services monthly. Then if it were a 30% net-collections rate, they would multiply the $50,000 times 30%. Then that’s what the physician would take home whenever it was paid out. Now, a draw flattens out the amount. So, there’s not as much variance from month to month. And so, what will happen is that the dentist, or dental associate, will then reach an agreement with whoever the owner is.
And instead of just saying, 15 days after the end of each month, I get paid, whatever it is, they would come up with a base amount. Let’s say it’s $8,000, and they’ll agree that no matter what happens, I will get paid $8,000 a month. And then, at the end of the month, or usually done quarterly, there will be a reconciliation. Then the owner will take what I was paid out versus what I collected based on my services. And then whatever the difference, that amount is multiplied by 30%.
How Is a Regular Draw for a Dentist Defined?
Let’s say your draw is 8,000 a month. And then you brought in 32,000 in the month. Then it would just be 32,000 minus 8,000. So, you have 24,000 multiplied by whatever the percentage was. If it were a third, then you would get another 8,000. You’d have a total of 16,000 for the month. Maybe there’s a month when the dental associate went on vacation and didn’t work for two weeks. That also happens where you could have a negative balance carried forward. You only brought in 7,000 a month, and they paid out 8,000. Then most of the time, the contracts would state that that negative $1,000 would then carry over into the next month.
And then the dentist would have to cover the difference between the two. That’s how a regular draw for a dentist is defined. Now, I guess the other way of describing it would be if there’s just an owner of the practice. Instead of having a base salary, you take an owner draw of whatever the profits were. But I find that discussing what’s a draw in a dental contract, the first part where the dentist has a percentage of net-collections, and then to even it out. They take that draw each month.
Can You Break a Dentist Contract?
Can You Break a Dentist Contract? And the short answer is yes. However, if breaking the contract means breaching the contract and you’re not adhering to the terms of the agreement. You are likely opening yourself up to liability for litigation or arbitration. Your employer can come and ask for damages related to recruitment costs to replace you, credentialing fees, administrative fees, and the list goes on from there. You are so, breaching your employment contract. If you’re going to break it, it is not a great idea, and we never suggest that to our clients. A much better way to end your contract is in the termination clause that’s in typically every dental employment contract. Underneath the termination clause, there are typically three ways that you would adequately terminate the agreement.
The first way is if you were to agree mutually. Hence, you and your employer agree to go your separate ways and terminate the employment agreement. However, this is rare, and we don’t usually see this happen. The second way is for-cause termination. This clause is weighted towards the employer. In this type of clause in a contract, there would be an enumerated list of sorts of offenses that would occur, and they could terminate the agreement with the dentist immediately. Some examples of things on that list are if you lose your license to practice dentistry or lose a DEA license. You are not credible with insurance companies: Medicaid, Medicare, and the list. And then, without-cause is the third and most common way of terminating a contract.
Contract Notice Periods
Most contracts state that an agreement can be terminated by either party for no cause, given a specific amount of notice to the other party. And typically, that’s between 60 to 90 days. So, you give your notice 60 to 90 days, then the contract is terminated, and you can go your separate ways. Another important thing is that if you decide to terminate your agreement, you want to do it exactly how it’s written and give proper notice. There’s usually a notice clause within the contract stating if the termination letter needs to be hand-delivered, mailed, or in some cases, emailed, but that’s rare. That’s how you properly terminate a contract. And then the next thing I want to address is that you also need to read your contract to know what requirements you have once the termination process has started.
Will You Have to Pay Back Benefits?
Specifically, suppose that the company gives you a signing bonus and relocation expenses. In that case, you’ll need to know if you must pay those back because some contracts have a certain amount of time. And if you terminate the contract within that period, you must pay that back. So, that’s something you want to consider. And then the last thing you want to think about when terminating a contract is malpractice, specifically tail insurance coverage. After leaving the employer, there would likely be a lapse in malpractice insurance. Typically, tail insurance covers it. Some employment contracts specify who is responsible for providing or covering the cost of tail insurance, the employer or the employee. You will want to look at that in your contract and will likely be detailed in that process. In summary, can you break a dental associate agreement contract? The answer is yes.
But you don’t want to breach it. You wish to terminate it properly by looking at the agreement you signed and doing it exactly how it’s written. And then, you also want to know any consequences that would likely incur, meaning paying back any of your signing bonuses. Also, I forgot that you want to look at the restrictive covenants in your agreement. That’s non-compete clauses. How long is that for, what area is covered, and you want to ensure you’re not violating that. You also want to ensure that you’re not soliciting employees or patients, which is likely outlined in your agreement. Again, it’s always important to look at your actual dental employment agreement because it would probably have all these instances outlined in the employment contract on how to proceed.
Other Blogs of Interest
- How is a Dentist Given a Draw in a Contract?: Dental Contracts with a Draw
- What You Need to Know about a Dental Associate Employment Agreement
- Are Associate Dentists Independent Contractors? | Dental Independent Contractor
How do you Terminate a Dental Associate Contract Without Cause?
How can a dental associate terminate an employment contract without-cause? Let’s first talk about the basics of terminating a contract. There are four general ways of terminating an employment contract.
The Initial Term Expires, and There’s No Renewal
In the contract, it’s usually going to state how long the contract lasts and the duration of it. Usually, it’s somewhere between one and three years. However, I’d say more and more contracts will have no fixed term. They’ll go on forever unless terminated by a party through one of the three ways we’re about to discuss. So, look at how long it lasts and whether it automatically renews. If it does, it’s usually for one-year terms, and then we continue until terminated. That’s the first way to terminate a contract.
It would help if both parties said, “Hey, it’s not working out.” It would allow if you didn’t give us any notice. Let’s wash your hands of it and move on. That’s fine. So, either party can terminate by mutual agreement. The third way is “with-cause termination.” If one party is in breach of contract, they must provide written notice to the other party. Then that party would have a certain amount of time to fix the breach. They will do that during what’s called a “cure period.” A cure period allows one of the parties accused of being in breach of contract to fix whatever the problem is. Usually, it’s 15 to 30 days.
With Cause Termination
Let’s take monthly bonuses paid to a dental associate with productivity-based compensation. And the employer isn’t paying the monthly premium, even though they earn well. The dental associate could give them written notice that says, “Hey, you’re in breach of contract.” You’re supposed to pay me my monthly bonus, and you’re not. If you don’t fix this within 15 days, I can terminate the agreement immediately for-cause termination. With-cause termination is the third way.
Terminating Employment via Without Cause Termination
Now, this blog aims to show how the dental associate terminates the contract without-cause. So, this is the most common way of ending a contract. In any dental associate agreement, you need to ensure there’s a without-cause termination, and I’ll say why. Typically, it would be somewhere between 60 to 90 days. That means either party can terminate the agreement at any time with a certain amount of notice to the other.
As I said, somewhere between 60 to 90 days is a kind of industry standard. In that scenario, let’s say a dental associate got a better job offer and wanted to move on. They give the practice a letter stating I am using the without-cause termination section in the agreement to terminate it. I will work the 60 days as required. And then, at the end of that, I’ll terminate the employment agreement, the contract terminates, and both of you can move on.
Employment Agreement Red Flag
It is an enormous red flag if you have a dental associate contract that does not have without-cause termination. And why? If you can’t get out of a contract, it can stick you for as long as the term. So, if it is a three-year contract and there’s no without-cause termination, you must stay for the three years, no matter what. Now, why would you want to leave? Let’s say the volume would be this amount, and it’s not, and the employer pays you on pure productivity. You’re getting paid a quarter of what you expected, or maybe the hours are bad, the calls are wrong, or there’s a lack of staffing.
Which makes you completely inefficient, or maybe the practice owner is just a jerk. You don’t enjoy working with him. There could be dozens of reasons you’d want to leave an employer, but if you can’t terminate the contract at any point, you are stuck. Why would an employer not have without-cause termination in their agreement? Well, the first thing is they’ve had an enormous turnover. People keep leaving. And so, they’re trying to ensure that someone can’t leave before a period. That’s kind of the first thing that I look at when I see no without-cause termination.
What if There Is No Without-Cause Termination in the Contract?
Now, it’s rare it wouldn’t have without-cause termination. But if it’s not in there, it’s because the employer is probably a bad manager, or you’re a terrible business person. And they can’t keep people on staff. And therefore, they’re trying to secure them for a period. So, no matter what, you want without-cause termination, somewhere between 60 to 90 days. Now, why that amount of time? For any healthcare professional, there needs to be continuity of care. It would be best if you considered it.
So, there need to be arrangements to either hire a new dentist to take over or refer the patients out to someone else. That’s why there needs to be a little lead time to ensure continuity of care. It is paramount to the termination. Well, that’s about it for without-cause termination.
How to Get Out of a Dental Associate Contract?
How to get out of a dental associate contract? You will sign one of two contracts when you are a dental associate. It’s either a dental employment contractor or an independent contractor agreement. Ultimately, it’s the same way of terminating the dental employment contract agreement. Still, I’m going to talk specifically about dental employment contracts because those are, I’d say, the standard type of dental associate agreement to sign.
Are Contractual Provisions For Length and Termination Present?
When the contract is signed, there will be language in the contract that states its term. So, how long it lasts and then termination means how either party can terminate the agreement. As far as the term is concerned, usually, it will be one of two things.
There is a fixed term with automatic renewals. It could be like a one-year term, which automatically renews for one year unless terminated. More often, there have been evergreen contracts where no term is listed. It just states the contract continues until someone ends it. One is not better than the other. It’s ultimately the same result. After you find out what the term is, go to the section about termination. The ways to terminate a contract are one, by mutual agreement. If both parties feel like it’s not working out, they don’t need or require a certain amount of notice. They say, alright, this doesn’t work out. We’re both going to wash our hands of this and move on.
With Cause Termination
Two, if there was a fixed term, let’s say it was one year, and there was no language about automatic renewal. If the one-year term expires and neither party decides to renew, it might terminate the contract. That’s it. Cause-termination is another type of termination. Suppose one party is in breach of contract. In that case, there’ll be language that states the party who thinks that the other party is in breach has to give them written formal notice that says, you’re in breach of contract due to this. And then, typically, there would be a language called a cure period. And the cure gives the party breaching the contract a period to fix whatever the problems are. Usually, it’s somewhere between 15 to 30 days.
In this scenario, let’s say the dental office is not paying a bonus they said they would, or it’s not timely. Whatever the issue, the dental associate would send them a letter saying, “We agreed that you would pay me this amount of bonus, but you haven’t paid this.” You are in breach of contract, you have 15 days to fix the breach, or I have the option of terminating the contract immediately. That’s one way to get out of the employment contract.
Without Cause Termination
The last and most frequent way is through without-cause termination. Every contract agreement a dental associate sign needs to have without-cause termination. And that means either party can terminate the agreement at any time with a certain amount of notice. Why is this important? I find this, especially in the dental industry. The volume/if compensation tied to collections can be puffed up before the dentist starts. So, they might get into a situation where they’re being paid purely on production. The volume isn’t there, or they’re making nothing. And then they’re stuck in a contract if there’s no without-cause termination language.
So, what you want is somewhere between 30 to 90 days for without-cause termination notice. The way that would work is just like if someone is in breach. The dentist will then state in the written letters that I’m terminating the agreement, per without-cause termination. That is the most typical method of terminating a dental associate agreement. My last day at work will be X date. I must appreciate the opportunity. The same goes for them as well. If maybe they don’t think it’s working out with the dentist, they can give them notice. Then they can make the dentist work out whatever the notice period is, or sometimes they can tell them, look, go home, or we don’t need you anymore.
However, they still must pay you for that notice period. So, if you had a 30-day notice, the dental office states were terminating the agreement. It would help if you didn’t come to work tomorrow. They still would have to pay the dentist for those 30 days. Now, the tricky part comes in. If you’re not on base salary, you’re not getting a daily rate, or you’re only getting paid on production. If you’re not productive, you’re not going to get paid. Then there needs to be a discussion before signing the contract and getting language in there. So that the dentist isn’t essentially working for free or not getting paid all for that notice period. There’s a notice period, at least in the healthcare field, generally for continuity of care. They don’t want a dentist or healthcare provider not to show up one day and say I’m leaving.
And then there’s a bunch of patients on schedules, people who need work done, and there’s no one to provide that. They can put the patients in a tough spot if there’s just no notice and their provider leaves. It is not the dental associate’s problem. However, if they give enough information, these are the patients of the practice, not the dental associate. And so, when the dental associate terminates the employment agreement, once they leave. They have no obligations as far as the patients go or worry about referring them or transitioning somebody else. That’s the employer’s problem. So, to get out of a contract, the term can end. You can mutually agree to terminate it, terminate it for-cause termination. If the other party doesn’t fix a breach or give without-cause termination in a letter, finish your time and move on.
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