- I heard Arizona is an at-will state. Is it a good idea to have an employment contract as an associate dentist?
You don’t have to have a written employment contract, but it is usually a good idea.
An employment contract allows both sides to clearly spell out the key employment terms. This avoids the possibility for misunderstanding in the future and allows you to know your rights under the contract. A good, thorough employment contract can also anticipate and resolve future questions that may not be at the top of your mind at the time, but may become important later on.
Some examples of the potential issues that can arise include: what happens if a malpractice claim is filed against me after I quit? Will my employer’s insurance cover me? If I am paid on collections, can I still get paid after I leave? How much time can I take off for vacation and sick days? Are there any restrictions on my ability to work? And the list goes on.
While sometimes these things can be worked out informally, if you have a good relationship with the practice owner, it is better to have everything in writing. Having a written employment contract can provide certainty even if there are changes down the line. You never know what the future holds, if relationships will deteriorate or the ultimate decision-maker for the practice will shift that responsibility elsewhere.
Another thing to keep in mind is that Arizona is an at-will employment state. This means that, if you don’t have a written contract, you can be fired immediately, with or without cause. If you have an employment agreement in place, you will usually have some notice before your agreement is terminated and you may even be able to negotiate terms such as a severance payment.
- Do I need a lawyer to negotiate my associate dentist contract?
You can and absolutely should negotiate the terms of your employment contract. Even most corporate dental practices can be flexible on some of the contract’s terms.
The employer almost certainly had an attorney prepare the employment contract. That attorney drafted the contract with an eye to protecting the employer’s interest’s, not yours. So, even if you and the employer agree on the basic terms, like the amount of compensation and the fringe benefits, you should still have your own experienced dental attorney review the contract.
- What key terms should I look for/be concerned about in my associate dentist contract?
The employment contract should, at a minimum, state the basics. These include the following:
1. How you are being paid (production versus collection versus per diem compensation).
2. What other benefits you will get with the job. Typical benefits can include health insurance, malpractice insurance, retirement contributions, CE reimbursement, and personal time off.
3. How the agreement can be terminated, and how much notice is required.
4. What constitutes “for cause” termination.
5. The extent of any restrictive covenants, like the non-compete and the non-solicitation agreements.
6. Whether and how you can access patient records following termination, such as if you are sued or get a board complaint.
- The dental practice owner wants to make my compensation percentage-based. Which is better: payment on collections or production?
This depends on how production and collections are defined, and what percentage is being offered. This is important because many practices will justify paying a lower percentage by basing payment on production, but they can sometimes define “production” in a way that, at the end of the day, you are essentially being paid on collections.
In theory, payment on production should become due as soon as you treat the patient. The dentist should get paid based on the amount billed by the practice, regardless of when, or even whether, the practice ultimately gets paid for the work.
In reality, many associate agreements allow the practice to adjust “production” based on bad debt, patient write-offs, and insurance discounts. This usually takes the form of a reduction in your future compensation when amounts are written-off.
If your associate agreement contains this type of definition, then it really is not much better than collections. Although you may get paid sooner for your work, you are still carrying the risk that the patient or the insurer won’t pay the bill and your compensation will take a hit.
- What is the difference between an employee and an independent contractor in Arizona, and why does that matter for an associate dentist?
The primary relevant difference lies in who will be responsible for payroll taxes.
Social Security and Medicare taxes are paid evenly by the employee and the employer. The Social Security tax is 6.2% for both employers and employees, up to the yearly cap. The Medicare tax is 1.45% and isn’t capped. Therefore, if you are classified as an employee, the practice will have to pay an additional 7.65%, on top of whatever it pays you.
Many employers like to classify associates as independent contractors to shift the burden of paying these taxes on to the associate. If you are classified as an independent contractor, you will be responsible for paying all of the payroll taxes. Employers can also save on worker’s compensation and unemployment insurance by classifying an associate as an independent contractor, rather than an employee, as Arizona law typically does not require independent contractors to be covered by worker’s comp insurance.
Although it might make financial sense for the employer to classify the associate is an independent contractor, it might not be wise. The IRS has a balancing test that looks at several factors to determine whether a worker should be classified as an independent contractor versus an employee. These factors include, among others:
1. Who has control over the worker’s schedule?
2. Does the worker provide his own tools?
3. Is the worker free to work at other facilities, or is he or she expected to only work for this employer?
4. Does the worker receive any benefits in addition to the monetary compensation?
In many cases, these factors weigh in favor of an associate being an employee of the dental practice. This is important because if the associate is misclassified, the employer can get hit with a claim for back taxes and fines by the IRS.
