Lawyer for Dentists, Dental
Corporations and Group Dental Practices
By Matt Dickstein
Dentist employment and
independent contractor agreements
Thank you for finding my suite of articles on
the basic corporate, business and contract law issues for
dental corporations and group dental practices in
California. The articles in this suite are:
In this article, I talk about dentist employment and
independent contractor agreements. I first discuss when a dentist is a
contractor as opposed to an employee. Second, I look at the
essential terms of a dentist employment contract and a
dentist independent contractor agreement.
Is you is, or is you ain’t, a contractor?
This is an important question because, from time to time, to generate revenue,
the IRS and CA EDD will audit dental practices on the issue
of whether a dentist is an employee or independent
contractor. These
governmental agencies hope that the practice has
misclassified the dentist as a contractor (not an
employee) so that they can collect on the plethora of taxes
and premiums for employees, e.g. trust fund taxes, interest
and penalties.
A dental practice should always be clear
and confident in how it classifies employees and
contractors. The cost of misclassification is very
high, and it's never worth it. Please read my article
Classifying a dentist as an employee or contractor
to learn more, including the factors for classifying
dentist employees and contractors.
Essential terms of a dentist employment
contract and an independent contractor agreement
The essential terms are about the same as
between a dentist employment contract and a dentist
independent contractor agreement. Once beyond the
boilerplate, both contracts deal with the same basic issues,
such as the description of services, compensation,
reimbursement of expenses, and term and termination (all
discussed below). One significant difference is that
employment agreements sometimes have clauses that address
the dentist’s purchase of ownership in the practice, whereas
independent contractor agreements rarely have such terms.
Job Description.
Whether or not the agreement is for a contractor or
an employee, it must clearly delineate the job
responsibilities. Dentists particularly care about their
hours, be it full-time or part-time, night and weekend
coverage, on-call hours and the like. Be sure to clarify
the dentist’s administrative duties.
Compensation.
You probably don’t need a lawyer to explain dentist
compensation, so I’ll keep it short. I frequently see
dentists receive a fixed base salary + an incentive based on
the net income that the dentist personally generates. For
example, the dentist might receive an incentive of X% of the
gross revenue he or she generates in excess of $Y (Y being
the expenses associated with the income including an
allocation of general overhead, that is, the break-even
point in income). For more on this topic, see my
article -
Compensation structures for group dental practices.
Expenses.
The practice’s payment of a dentist’s “personal”
expenses is an everlasting and wondrous source of conflict.
Everyone wants to run their expenses through the
corporation. The employment contract or independent
contractor agreement must clearly delineate the expenses
that the practice will pay for the dentist. A practice
usually will pay more expenses for an employee than for a
contractor. Here is a list of expenses that practices
frequently pay:
- Professional society dues (within reasonable
limits)
- Malpractice insurance
- Continuing education and related travel
costs (again, within reasonable limits)
- Board certification
Term and Termination.
I prefer that a dentist’s employment contract or
independent contractor agreement be at-will with a notice
period, meaning that either the dentist or the practice can
terminate the relationship at any time (after the notice
period) for any reason. I prefer a free relationship, as
opposed to contractually locking the two sides into a
relationship that isn’t working – this only leads to unhappy
endings and litigation.
If you want a contract for a term of years, be sure
to include termination for cause.
Common examples of cause are:
- Loss of license to practice dentistry
- Violation of a material provision of that agreement
- Felony conviction or abuse of controlled substances
Dentist Buy-In.
Dentist employment agreements sometimes have clauses
on the dentist’s purchase of ownership in the practice.
Usually the clauses are vague and non-binding, and only
express the parties’ expectations on the subject. If the
dentist’s buy-in is a material part of the deal, however,
specify these deal terms:
- The ownership percentage that the dentist will
obtain
- The purchase price
- The period over which the dentist will pay the
purchase price
- The extent of the dentist's participation in
control decisions for the practice, e.g. is the
dentist on the board of directors?
For more information on this subject, see
my article,
Bringing
a new partner into a dental practice.
To learn about another crucial contract
for dental practices, see
Shareholder buy-sell agreements for dental corporations.
To learn about non-competition clauses for
dentists, see
May a
dentist compete against
his or her former practice?
This article only gives a short roadmap of
dentist employment contracts and independent contractor
agreements. There is a lot more to this topic than
introduced here. Please get competent legal counsel before
you hire a dentist.
Call me to schedule a
legal consultation: 510-796-9144 | 