Key Points for Non-Solicitation Agreements
When reviewing Associate Contracts, we often find that Non-Solicitation issues are not addressed as comprehensively as they should be. Every Associate Agreement should contain terms that specifically state the associate’s behavior in soliciting patients and/or staff after they leave your employment. Here are a few points that should be included in an agreement that will protect your interest:
If the associate breaches the non-solicitation terms in addition to any other legal remedy the employer may take, the associate should agree to a liquidated damages penalty, which essentially is a value placed on the record of each patient who he/she solicits.
Copying of Records
To further enforce the solicitation section of your associate contract, specific terms and conditions should be stated concerning the associate not being able to photocopy any patient records without your authorization and, moreover, taking any records from the premises unless approved by you. This puts the associate on notice that your patients’ information is not to be compromised nor copied in any manner.
Announcing a New Location
Although solicitation is a direct, calculated action to improperly contact patients after employment the associate should be able to place announcements in appropriate publications announcing that he or she is opening a new dental practice or they are working at another practice (if it’s outside of the covenant area) where covenants are enforced. The associate should not list your name in any advertisement, (for example formerly affiliated with Dr. Smith), as there is implied goodwill here, and that may be construed as solicitation. If a patient chooses to continue to be treated by your former associate at the associate’s new location, the associate should be allowed to have patient charts and files transferred to the associate, of course, at the patient’s request. Typically, an administrative fee of $25 to $50 per patient should be charged to the associate per patient record in order to reimburse the employer for the time and effort to get the records copied and mailed to the new location.
If an associate brings a number of patients to your practice, in order to avoid any problems with solicitation after they leave, we suggest that a patient list be prepared of all patients the associate is bringing to your practice and attach it to the employment agreement.
Although most contacts have stipulations on patient solicitation, very few have stipulations about staff solicitation. In fact, solicitation of staff, in our opinion, can be more detrimental than losing 30 or 40 patients to your former associate. Imagine if your dental hygienist of 20 years were solicited by your former associate. Chances are, they’ve established a significant amount of goodwill and if that hygienist were to leave you may be compromised from an economic point of view as patients may follow your former hygienist. Consider adding a liquidated damages penalty for staff members who are solicited by your former associate.
We typically recommend two to three months of a staff member’s salary as a liquidated damages payment. Recruiting qualified dental staff is quite expensive in terms of advertising, interview time and training. There will be economic loss if a lay staff member is solicited.
As part of the restrictive covenant and non-solicitation sections of your agreement, a section on confidentiality should also be included which would state that the associate will not during the time of employment or during the time thereafter use, disclose, divulge or communicate to any person, company or other entity in any manner any information acquired by the associate that relates to the practices finances, how it operates or other significant data, as well as information on the employer or other dentists or staff members in the practice. Again, it is just another way to protect the integrity of your practice operations so that the associate does not make any comments that could have a negative impact on your goodwill in the community.
In conclusion, as we stated in the prior column, well-written employment agreements with very specific terms and conditions lets the associate recognize that you are running a business and anything that can cause harm to your practice deserves an appropriate response to protect your business interests.
Dr. Thomas L. Snyder is Managing Partner of The Snyder Group, LLC, a nationwide practice transition and financial management consulting firm. With more than 75 years of experience in the field, The Snyder Group can provide you a full range of services relating to practice transition matters and retirement planning. They can be reached directly at 1.800.988.5674.
If you would like additional help, email Dr. Snyder at firstname.lastname@example.org.
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