Contractual Obligations by Dr. Suzanne Gilman

Dentaltown Magazine

A dentist–attorney discusses what associate dentists should consider during employment negotiations


by Suzanne Gilman, DDS, FAGD, Esq.


Several years ago, while I was on lunch break during a continuing education seminar, I was speaking with the dentist next to me, whom I will call “Dr. Lloyd.” When he heard I was in law school, he told me about something that had happened to him when he was a dental associate: His prospective employer, a dentist, had asked him to sign a contract that included a two-year, 15-mile, noncompetition provision.

Dr. Lloyd had been eager to start working and had always heard from his dental colleagues that noncompetition agreements were unenforceable, so he didn’t negotiate any aspects of the contract or have an attorney review it before he signed. One year later, he left the practice and found another job within the noncompetition range.

The first employer sued Dr. Lloyd, trying to enforce the noncompetition provision to prevent him from practicing at the new location. As surprising and frustrating as that was, his new employer dentist, not wanting to deal with a possible legal battle, fired him with one day’s notice.

No one could blame Dr. Lloyd, with astronomical student loans and a desire to create some life balance, for trying to secure employment in as short a time as possible. The issue was that when he secured that job, he was unable to effectively negotiate with his prospective employer because he wasn’t aware of state law and customary business practices that normally influence dentist employment contract negotiations.

Many prospective dental associates do understand the importance of having an attorney review an employment contract as they negotiate for their first job. This article will:

  • Reinforce the importance of being knowledgeable about the negotiation process.
  • Reiterate the importance of attorney review before signing.
  • Discuss the most important provisions of dental associate employment contracts.

I practiced dentistry for 12 years and I am also a licensed attorney. Although I will be discussing general legal concepts regarding contracts, this article should not be construed as legal advice; readers are encouraged to seek the advice of an attorney who is licensed in their state who has experience with the nuances of dental associate employment contracts and can advise them regarding their specific situations.

Terms and conditions
An employment contract is an agreement between the employee and employer that states the terms and obligations of the employment. What is written in the contract may supersede oral conversations that took place before or after signing. (If the contract contains an “Entire Agreement” clause, the written contract contains the entirety of the agreement between the two parties.) As long as the contract is signed by both parties, either party can ultimately enforce what is written. Indeed, certain obligations can last for more years than it took to become a dentist—and be financially just as painful.

Being unaware of the law or being time-crunched is not a defense against agreeing to an employment contract you later find to be disadvantageous. A court may not have much sympathy for dentists who end up in a lawsuit with their employers because they didn’t consult an attorney when they originally signed the contract; dentists are well-educated people with the means and opportunity to seek counsel, who can create a level playing field before they sign a contract, and a court will treat them as such.

While negotiating the contract, the goal is to keep the atmosphere friendly, not contentious. Whether attorneys become involved may depend on how much leverage the employee has: If the employee is a recent graduate, it may be wise to have an attorney review the contract and then have the employee go back to the employer to renegotiate any problematic areas identified by the attorney. The attorney can also help keep her client on a reasonable track: Nitpicking over every provision can derail a deal faster than moisture can creep into your composite prep.

A new dentist will have less negotiating power and may not be able to change too much, except for something strongly unreasonable or unenforceable. If the employee is more experienced or brings in a higher level of skill or specialization, then her negotiating power is stronger and it becomes more appropriate for the two attorneys to converse.

Note that just because the associate cannot change a provision, it doesn’t mean it’s acceptable to ignore it: A dentist could be held to all of the provisions in an employment contract he signs.

The three most important parts of a dental associate employment contract—each with its own set of obligations—are the restrictive covenant, termination and compensation. Some obligations will be based on state law, so negotiation space is narrow; other obligations, based on customary business practices, will have a wider berth for discussion.

Restrictive covenant/noncompetition
The restrictive covenant actually consists of three agreements:

  • Noncompetition.
  • Nonsolicitation.
  • Nondisclosure of trade secrets.

This article discusses the restrictive covenant only in terms of noncompetition. That agreement limits an employee’s subsequent job to outside a particular geographic area for a predetermined amount of time.

Let’s say a patient asked you if she was a good candidate for dental implants. Without any diagnostic information, the answer would have to be, “It depends.” To give an educated response, you’d need radiographic information and a health and dental history. The answer as to whether a noncompetition agreement would be enforceable also “depends” on certain factors.

Each state has its own laws regarding noncompetition agreements, and those laws can include the language restrictive covenant, covenant or noncompetition agreement. For example, in California, noncompetition agreements are not valid unless they apply to the sale of a practice or the dissolution of a partnership.1 According to the Texas Business and Commercial Code, the covenant not to compete must provide, in part, for a buyout of the covenant by the physician at a reasonable price.2 In New Jersey, the court will determine the enforceability of a restrictive covenant by evaluating three factors: the extent to which the covenant protects a legitimate interest of the employer; whether it imposes undue hardship on the employee; and if its enforcement will be injurious to the public. (The employer needs to protect its relationship with patients and its investment in the practice. To determine hardship, the court will look at the reason the employee left the practice,3 and the likelihood of the employee finding work outside of the geographically restricted area. The covenant will be injurious to the public if its enforcement results in a shortage of dentists/physicians within the area.4)

Not only is it recommended that dental associates find out how their state court addresses noncompetition agreements, but they also should consider if the practice has satellite offices. Will the agreement apply to all of the practice’s locations, or only where the associate works? Another potential negotiation point is how long the associate has to be employed at the practice for the noncompetition agreement to be effective. Thirty days? A year?

Termination
As Dr. Lloyd and I spoke, another dentist at our table told us her story: At a previous job, her contract obligated her to give 60 days’ notice if she were leaving. Like most people, after being hired she put the contract in a drawer and forgot about it. When she did leave, she gave only two weeks’ notice. Because of the backlog created by the short notice, she was required to reimburse her former boss for the locum tenens dentist he hired so patients wouldn’t have to wait too long.

There are five categories that may affect discharge of an employee. Consult with your attorney to see if any of them, or a combination, could be relevant to you.

1. At-will. In most states, employees are considered at-will, in that they can be let go at any time for any reason and the employer is not required to give a reason. (Conversely, the employee can leave at any time, as well.) This is in the best interest of the employer; an at-will employee is the most vulnerable. If possible, it may be recommended to attempt to negotiate for one of the following four categories.

2. At-will with notice. Either the employee or the employer is to give the other written notice, at intervals of 30, 60 or 90 days before the termination date. If associates have “with notice” in their contracts, they should be aware of this deadline, by which they have to tell the employer whether or not they’re staying. Employees can find themselves sued for damages (money) if they don’t communicate their intentions in accordance with the contract, as the dentist discussed above found out to her own detriment. Associates should realize, however, that “notice” works both ways, with consequences: Although it’s better than being purely “at will,” the associate still could be out of a job for no discernible reason—with just 30, 60 or 90 days to find another one.

3. Termination for cause. An employee can be terminated for egregious activity only, such as fraud, dishonesty, malpractice or a crime other than minor traffic violations. There will be no notice, no severance and no time to fix the problem. Here, employees should be aware of the terms that define “for cause,” which may be different based upon state law or the terms of the contract.

4. Termination without cause. An employee can be terminated if it’s just not working out, such as the inability to get along with staff or patients. The employee will receive notice to fix the problem before the action is taken, and if there is, there may be severance pay.

5. Contract for a fixed amount of years. The employer cannot terminate the employee except for cause. This is normally when the dentist has a special skill that is desirable to other practices.

Compensation
Recently, at a convention, I ran into a colleague whom I hadn’t seen in a while. She told me she no longer was at the job she had the last time we spoke. Although she left that job on good terms, things had soured because her former boss refused to pay her the percentage of funds that were collected after she left, which she believed she was owed. However, no provision in her contract existed for postemployment compensation.

Prospective dental associates probably do their homework on what is a reasonable salary, because it has the most influence over whether they accept the job. Unfortunately, salary is also the hottest wellspring for future disputes. A clear discussion followed by a detailed contract provision is important to prevent strife. Because compensation is based on business custom, there is room to discuss trade-offs, such as the modification of duties or paid continuing education days. Importantly, employees will want to be paid for everything they produced up to the last day they worked, and have a provision for collecting their percentage after they leave the practice.

Conclusion
Later at the seminar, I caught up with Dr. Lloyd at the break. He told me that for his present associate position, he had applied the lessons learned: By hiring an attorney for his present contract, he was informed, composed, protected, and able to ask the right questions. That created a more comfortable and confident working relationship for both him and his employer, and he was happy with the arrangement.


References
1. CA Bus. & Prof. Sec. 16600, 16601,16602, 16601.5 (California Code (2018 Edition)); Edwards v. Arthur Andersen LLP, 44 Cal.4th 937, 189 P.3d 285, 81 Cal.Rptr.3d 282 (Cal., 2008).
2. Tex. Bus. & Com.Code Ann. § 15.50(b)(2).
3. Karlin v. Weinberg, 390 A.2d 1161, 77 N.J. 408 (N.J., 1978)
4. Community Hosp. Group v. More, 183 N.J. 36, 869 A.2d 884 (N.J., 2005)


Author Bio
Author Suzanne Gilman, DDS, FAGD, Esq., is a licensed dentist in New Jersey and a licensed attorney in Minnesota. Gilman graduated from New York University College of Dentistry and Rutgers–Newark School of Law. A former dental associate, she was the owner of her solo practice for seven years. Gilman is a member of the Tri-County component of the New Jersey Dental Association. Within Tri-County, she has served as vice president, newsletter editor and the chair of Peer Review. She also taught dental radiography to dental assistants and was an associate professor at the School of Health Professions of the University of Medicine and Dentistry of New Jersey. Email: suzannegilman@me.com
 

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