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Issue #28 - 9.11.07
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The Key Ingredients of an Associate Contract
If you’re considering hiring an associate, by all means, you must have a written contract. Associate contracts are for mutual protection. They clearly outline all terms and conditions of your relationship and assure there is no miscommunication along the way. Contracts are also a way of protecting your most variable asset, your dental practice. Here are several key ingredients of Associate Contracts.
Work Schedule
List the associate’s work schedule. Also, make sure you list any responsibilities for “on-call” duty since this is often not discussed prior to an associate’s employment. Clearly defined schedules avoid any embarrassment if a patient calls on the weekend and there is no one to take the call.
Compensation
Compensation Ranges
Associate compensation ranges nationally between 30% to 35% of Net Production and 32% to 37% of Collections. Most well run practices, will collect 98% to 99% of Net Production, so that may be a good alternative to Collections. Your decision to use Net Production or Collection often is based on the quality of the dental management software to track associate’s Net Production or Collections.
Lab Expenses
We recommend that the percentage the associate is being paid as compensation should be the same percentage that is deducted for lab expense. This means that you are deducting lab expense from the fee charged for the procedure.
Health Insurance
If you are offering health insurance to your full-time staff and if your associate is a full-time employee, this fringe benefit must be provided. We recommend single coverage for the associate, and if there are any dependents, you can have the additional premium paid by a pre-tax payroll deduction through a Section 125 plan.
Malpractice Insurance
We see this benefit being provided by the Employer about 50% of the time. Premiums for general practitioners are usually low in the first few years after graduation, so it is not a major expense. However, for specialists where premiums are considerably higher, it is provided as a fringe benefit in the associate’s Compensation package.
Continuing Education Allowance
We recommend a continuing education allowance of $1,500 per year. This would be for courses that the practice feels would be beneficial to the associate’s clinical development and to and the practice in general. These courses must be approved by the Employer.
Non-competition Clauses
It has been our experience that an associate will develop goodwill after a one to two year period due to the relationships that the doctor has made with patients. In fact, to offset a potential loss of patients, if the event the associate leaves your practice, a non-compete clause should be added to the contract. Certain states do not allow covenants so check with your state board in that regard. Non-competes must be reasonable in their geographic restriction. We recommend generating a zip code analysis to determine what distance 80% of your patients are traveling. This will give you a basic mile radius for the covenant. We then add one mile and that should cover 90% of the distance your patient’s travel. Another key element of the covenant is its duration. We find that Covenants running more than two years may be nullified in many jurisdictions.
Incremental Covenant Penalty
We utilize an incremental covenant penalty in our contracts. They are as follows
| Months Employed | Penalty |
| 0-6 | None |
| 7-8 | 3 Months |
| 8-9 | 6 Months |
| 10-11 | 9 Months |
| 12 | 12 Months |
| > 12 Months | 24 Months |
Non-solicitation
Minimally if a covenant is not allowed in your State, or if you cannot get the associate to agree to a covenant, at least have them agree to a Non-solicitation Agreement prohibits them from soliciting patients or staff. The duration of a Non-solicitation Agreement ranges from 1 to 2 years.
Option to Buy-in
Some doctors want to include an option to buy-in. This clause must be carefully worded so not to “promise” a partnership relationship, but rather offer an opportunity to discuss its possibility.
Identification Issues
The associate should carry the same professional liability insurance company as the employer with the same thresholds, for example: $1,000,000 / $3,000,000.
Marketing Materials
In the event the practice is investing funds on associate related marketing activities and if the associate leaves on their own accord within the first six months, we suggest that the associate reimburse up to 50% of those marketing expenses.
Summary
Employments Contracts are your insurance policy against an unscrupulous employee who may potentially cause economic harm. In fairness to the associate, terms and conditions of employment are clearly defined so that there are no misunderstandings in your affiliation together.
The Snyder Group provides comprehensive employment agreement contract templates. Please visit our website for details.
Questions regarding Partnerships? Email Dr. Snyder at Drsnyder@thedentistsnetwork.net.
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