Many factors play a role in a dentist’s career trajectory. Their skill and professional demeanor, the quality of the patient experience, and effectively distinguishing themselves in a crowded marketplace are certainly among those elements.
But dentists, whether they are seeking their initial placement or moving between practices, need to pay close attention to the document that will profoundly impact their professional future: their associate employment agreement.
Dentists joining an existing practice are almost always asked to sign an employment agreement. This document contains many provisions that will govern a dentist’s career while employed by the practice and in the years that follow. If you hold in your hands a proposed associate agreement, it is critical that you understand its terms and consequences - and that you meet with an
attorney who has experience with dental employment contracts
– before signing on the dotted line.
While the entire document requires careful review, here are five key elements of a dental associate agreement that you should pay particular attention to:
1. Compensation Formulas
“How much does it pay?” Very few people, in any profession or occupation, will accept a position or sign an employment agreement without knowing the answer to that question. But in many associate agreements, the answer may be much more complicated – and confusing – than a straight annual salary.
A dentist’s total compensation package may consist of several different elements, each of which will impact how much a dentist actually earns. In addition to a base salary, these formulas often include commissions. Commission is a compensation arrangement under which the amount of compensation is based on the employee-dentist’s production. For an associate dentist, the amount of commissions could be calculated using:
- a flat percentage of the revenue generated, or the number of patients treated or procedures performed, by the dentist;
- the total amount billed for the work that the dentist performs in a pay period; and
- the gross amount collected from the dentist’s patients for work they performed in a pay period.
2. Non-Competition Agreement/Restrictive Covenants
If the day comes when a dental associate leaves their current employment, their associate agreement may limit (or at least attempt to limit) their ability to practice elsewhere. Typically, a non-competition agreement, sometimes referred to as a restrictive covenant, will purport to restrict an employee’s ability to engage in their current occupation within a specified geographic area for a set period of time. For dentists, this can mean that they pledge not to treat any patients in the identified area until the end of that period.
Similarly, non-solicitation agreements restrict an employee’s ability to actively seek the business of, or treat, the employer’s current patients/customers/clients/customers for a given period, though they are free to set up shop and do business.
Often, these covenants are so broad that courts will not enforce them. A court will consider the two primary factors when evaluating a non-competition agreement: its reasonableness and whether it is supported by sufficient consideration (such as a promise of continued employment). Specifically, for a non-compete to be enforceable in Illinois:
- Its geographic and temporal limitations must be no greater than needed to protect a legitimate business interest;
- Its restrictions must not impose an undue hardship on the employee; and
- Its restrictions must not be detrimental to the public.
While the specific non-compete in a proposed agreement may ultimately be unenforceable, associate dentists should attempt to address the nature and scope of such provisions at the outset rather than in contentious litigation after they leave the practice.
3. Term of Employment/Termination Provision
In Illinois, an employer can fire an employee for any cause at any time, other than for legally prohibited reasons such as race, gender, religion, and disability. The other exception to the rule of “at-will” employment is where the employer and employee enter into a contract that sets forth the term of employment, the reasons that could justify termination, and the notice required if the employer or employee decides to end the relationship.
Needless to say, an associate dentist and their attorney should ensure that they are fine with the proposed duration of employment, whether the parties can extend it, and why it could end.
4. Liquidated Damages
A “Liquidated Damages” provision in a contract defines or specifies the amount of damages that a party must pay if they breach the terms of their agreement without the non-breaching party needing to prove the actual damages they incurred, if any.
Courts will generally enforce contractual liquidated damages provisions where the damages due to a violation of the agreement are difficult to calculate and the liquidated damages specified bear a reasonable relationship to the foreseeable loss due to a breach. Given their potential liability under such a provision, associate dentists should carefully consider any liquidated damages clause in their agreement.
5. Malpractice Insurance
In a dental employment agreement, a section regarding “insurance” typically concerns dental professional liability insurance (malpractice insurance), and specifies which party is responsible for securing insurance coverage for the employee. Some agreements may require the employee-dentist to purchase his or her own insurance. In others, the employer will provide the insurance (sometimes through a group policy that will cover the employee-dentist). If the employee is responsible for procuring the insurance, this provision will also likely dictate the type and amount of the policy that the employee is responsible for procuring.
Malpractice insurance premiums can be substantial, so knowing who will be writing those checks will impact the financial benefits of any proposed compensation package.
We Focus on You So You Can Focus on Your Patients
As noted, no associate dentist should sign an employment agreement without reviewing the document with experienced counsel. At Grogan Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you.
Please call us at (630) 833-5533 or
contact us
online to arrange for your free initial consultation.
Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices. This blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.