New dentists who have recently graduated from dental school are often unprepared to make the leap to buy or start their own practice. For this reason, working for an established dental practice can be a great way to jump into the deep end and gain the required experience to propel your career. A dental associate agreement is a legally binding document between a dental practice and an associate dentist.
An associate agreement outlines the terms of employment, compensation, restrictions, and other concerns which you should understand before signing the agreement.
Depending on the dental practice’s needs, associate dentists can be hired either as full-time employees or as independent contractors. The majority of owners will want you to work as an independent contractor. With this status, you’ll have to pay your own benefits and insurance, as well as self-employment taxes.
The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance). However, independent contractors do have the advantage of being able to deduct business expenses to reduce their overall tax liability and boost their total income.
At a minimum, new dental graduates should ask the following questions: (i) “what is the total compensation package?”; (ii) “what is the anticipated work schedule?”; (iii) “what revenue expectations do you have for this role?”; (iv) “how much does the practice produce and collect monthly?”; and (v) “what types of procedures are performed at the practice?” It is critically important to understand and have a good estimate of your income from a particular role—particularly in today’s high-debt, high-inflation environment.
Compensation in dental associate agreements can be structured in a number of ways:
- Percentage: either a percentage of collections or percentage of adjusted production;
- Salary: often set up as a specific amount per day or week;
- Hybrid: a combination of the two e.g. the dental associate receives a set amount per day and a percentage of collections or adjusted production.
We recommend insisting upon a hybrid compensation structure. This guarantees you a certain amount of money per day, but also incentivizes the owner to bring you more patients. The hybrid formula protects your weekly and monthly income while preparing you for the future. It is also important to understand how the compensation is calculated so the parties to the agreement can have a clear understanding of what is to be paid and when.
Term of Contract
Most contracts last for one year, although some owners may try to lock you in for longer. Unless you’re part of a federal program that helps you pay off your loans in exchange for working in underserved areas, or if you’re a specialist and need to learn as much as you can from the mentor, we strongly recommend sticking to one-year contracts.
If a life-changing opportunity comes along and you want to buy a practice or relocate, it’s important that you’re not bound to a multiple-year contract. There can be penalties for terminating your contract early. Our recommendation is to only sign one-year contracts so you can learn what you can and have the option to move on after a year.
Restrictive covenants can prevent a dental associate from working in a specific geographical location for a certain amount of time. As the law regarding restrictive covenants varies by state, it is important to have a firm grasp on what is and what is not permissible in your state.
The typical restrictive covenant lasts for 18 months, but sometimes we see them extended for up to two years. Dental practice owners will also try to prohibit an associate’s ability to solicit employees and patients; treat the patients of the practice, regardless of location; and keep confidential practice information and trade secrets.
If your dream is to own a practice in your hometown, our advice is to find a location 20 to 25 miles away that’s still drivable for you to get some experience for a year or two before buying or opening your own practice in your hometown or city.
Why is it Important to Have an Attorney Review Your Associate Agreement?
The idea of discussing your career with a lawyer so early on may seem strange to you. However, the legal issues new graduates need to consider are equally significant to those faced by mid-career dentists, or those considering retirement.
If you do not involve an attorney from the beginning, you risk locking yourself into a bad contract that is difficult to terminate. You may be subject to an unfair non-compete clause or a financial penalty for leaving before a certain date. These are just a few examples of contract provisions that should be reviewed with an attorney and negotiated before signing.
Additionally, experienced dental attorneys typically have a great understanding of the marketplace and can provide you with career guidance and wisdom on how to build your career.
Our Dental Attorneys Will Protect Your Best Interests
Getting out of a bad contract is not easy. In order to negotiate the best employment contract, it’s essential to spend some time and invest a little money upfront to hire an attorney.
Have additional questions about employment agreements for dental associates? Contact our experienced dental practice attorneys at Wood and Delgado and we will be happy to review your associate agreement so you don’t fall prey to unfair conditions.
Wood and Delgado has represented over 8,000 dentists since 1980 and focuses its efforts on supporting the dental community with their business needs. If you have questions about employment agreements, leasing office space, or buying or selling a dental practice, don’t hesitate to contact Wood and Delgado at 800-499-1474.