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Dental Associates: Tips for Your First Employment Agreement

You’ve officially made it through dental school. Congratulations! Now, you’re looking for an associateship to launch your career. When doing so, we recommend working with an attorney to review your employment agreement before joining a practice as a dental associate.

In this blog, we’ll tell you why that is so important, as well as, some frequently asked questions we hear from our clients to help you make sure you’re entering a contract that will benefit you in the long run.

As I prepare to leave dental school, how soon should I connect with an attorney for assistance with reviewing employment agreements?

It may sound cliché, but it comes down to that saying, “It’s never too soon to start.” This is especially true if you’re getting term sheets.

What is a term sheet? Rather than a full-on contract, a term sheet is typically a one-page description of what a job (or the contract) would look like. It should contain brief descriptions of compensation, schedule, and the expectations of the employer for the employee. Essentially, when both parties agree to the term sheet, that’s when the full contract or agreement is put together.

Once the associate and host doctor are engaging in meaningful conversation about impending employment, it doesn’t hurt to have someone waiting to draw up or review a contract. In fact, when you discuss employment one-on-one with the host doctor, problems can arise if they start making promises that they cannot deliver..

A lot of times, attorneys won’t be contacted until someone has a contract. But, it doesn’t hurt to talk to an advisor or attorney before this point. The important thing is to not sign anything before reviewing it with your attorney. That way, they can help identify any underlying issues or abnormal restrictions.

Ultimately, the earlier you start discussing the terms, the easier it is to incorporate them into your contract. Once you have the contract in hand, having an attorney is absolutely necessary.

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As I prepare to leave dental school, what are some red flags in an employment agreement I should be aware of?

The first red flag is the structure of the employment agreement.

Whether it’s an independent contractor agreement or a true W2 agreement. We advise that young dental associates go into an employment scenario with a W2 employment agreement. That way, taxes are withheld from your paycheck, so you don’t have to worry about doing your own withholdings or quarterly taxes.

The second red flag comes down to the compensation structure.

It can be structured a number of ways:

  1. Some type of percentage – either a percentage of collections or percentage of production;
  2. A salary scenario;
  3. Or a hybrid of the two where the dental associate receives a small salary amount per day or a percentage of collections or production. Whichever is greater.

What’s beneficial about a hybrid structure is that the dental associate can make more if they’re working harder. Plus, it gives them a stable base pay, which can help young doctors just starting their career feel more comfortable.

What we watch out for is a future advance against earnings. The main reason we don’t like this for young doctors is that when they get paid, they put it in the bank. However, in a future advance against earnings situation, they may find out later that they didn’t earn as much as they were paid per their percentage of collections. Now the dental associate is in a situation where they owe money back to the practice.

The next red flag to look for involves benefits.

When it comes to benefits packages, generally with young dental associates, paid vacation isn’t included. However, sometimes lab bills and malpractice are covered. If paying malpractice is mentioned, make sure to read the fine print. In some cases, the agreement may state that they will pay your malpractice. But a closer look can reveal that the expense will be deducted from your compensation at some level. Figuring out what your true benefits are vs. what’s been paid on your behalf out of your own paycheck is important to understand.

Additionally, having a comprehensive understanding of pay, the compensation structure, plus all of the benefits can help you determine the best opportunity to pursue.

Termination language can be another red flag.

This is a big question – how do you get out of the contract? Young doctors tend to start the first job quickly because they feel like they need the money to start paying back loans. It’s a lot of pressure. Because of that, they may not get an advisor or attorney to look at their employment contract.

The problem, in this case, may not be what you’ve agreed to for your current position, but what you’ve agreed to after the fact in the termination language. Can you terminate the contract if you want out? In some cases, the contract will state that the employer is only required to give a week or 30-day notice for termination, while the dental associate is required to give 90-day notice or longer.

Obviously, that is uneven. We like to make sure it is equal across the board.

Additionally, some contracts won’t allow the dental associate to terminate the contract until after the first year. These are things to be aware of. It’s all about thinking about the future. Instead of negotiating an extra one or two percent on your compensation, negotiate your ability to leave a bad situation.

Where we really see this come into play is when a doctor knows they want to own a practice in a year or two. If the dental associate is in a year-long employment agreement and has to give a 90 or 120-day notice, they could miss out on an ownership opportunity that pops up. A 30-day notice should really be enough time for both the employer and the doctor.

The schedule can be another red flag.

There are many contracts that are totally blank when it comes to the schedule, or it lists a blanket statement like “at the employer’s discretion”. Here’s the problem – when you agree to an employment contract, you’re agreeing to whatever the practice’s schedule is. Is the practice open three days per week? five days? Are they open on weekends? When are you expected to cover emergency visits? Does the practice rotate emergency coverage?

The best scenario would be when the employment agreement spells out the number of days and hours per day. Knowing those expectations upfront is much more ideal than trying to renegotiate once the contract is in place.

Restrictive covenants are another red flag we look for.

This can prevent a dental associate from working in a specific geographical location for a certain amount of time. In that scenario, if you want to own a practice in your hometown, our advice is to avoid working in your hometown as a dental associate.

The typical restrictive covenant lasts for 18 months, but sometimes we see them extended for up to two years. The mileage range, on the other hand, varies widely. It really depends on how densely populated the area is. For instance, if the area is densely populated, the range could be a couple of miles; but if it is a more rural area, it could be 20 miles.

That’s the non-compete of the restrictive covenant. The other part can include non-solicitation. That means when you leave the practice, you can’t try to recruit their employees or patients.

dental employment agreement

What are the risks of not having an attorney review my employment agreement?

The main risk would be locking yourself into a bad contract that you cannot get out of without negative implications. For example, you may be subject to an unfair non-compete provision, or there may be a financial penalty for leaving before a certain time frame. These are just a few examples of provisions in a contract that would be beneficial to review with an attorney and negotiate prior to signing.

The biggest issue here is when an associate agrees to a contract they don’t truly understand. Some people end up signing contracts based purely on conversations. Unfortunately, when you don’t have an attorney review it, you’re mostly likely going to miss some of the important terms we’ve mentioned.

In some cases, doctors avoid consulting with an attorney because of the cost. Here’s the thing – it should only take an hour or two of the attorney’s time to review the employment agreement and negotiate until a final contract has been drawn. Spending a little upfront could save you big in the long run.

Additionally, if you choose not to work with an attorney, you risk the expense of trying to get out of a bad contract later, and that can be vastly more expensive. Doctors sometimes pay thousands of dollars to try to challenge their contract, and it doesn’t always end with success.

If a court looks at the contract and rules in your favor and agrees that the contract is overbearing or illegal in some aspect, the ruling will not necessarily negate the whole contract. It can only apply to that particular provision or section of the contract in question.

Bottom line – it is not always easy to get out of a bad contract without negative implications.

That’s why it’s so important to spend some time, and make a small investment upfront to have an attorney by your side when negotiating an employment agreement.

Have additional questions about employment agreements for dental associates? Contact JPA Dental Transitions or Jordan Law Group, we’ll be happy to help.

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Joe Jordan
Written by

Joe Jordan

Joseph D. Jordan, JD, is a North Carolina licensed attorney working with doctors in the areas of dental practice acquisitions, transitions, and associateship placement.