Associate agreement mistakes to avoid15th February 2017
Stephen Knowles, a dental sector specialist solicitor for PFM Dental Legal Limited, explains why proper contracts with your staff are vital. This article was first published online on www.smile-onnews.com on 9 February 2017.
Because your staff are your most important and expensive asset It makes sense to have proper contracts with them. Here I outline the most common mistakes I see when reviewing associate’s agreements. The list is not, however, exhaustive!
1. No written agreement
Given the investment of time and money that a practice owner puts into their associates I am amazed how many do not have a written agreement in place. They rely on word of mouth or, at best, an offer letter to form the basis of terms agreed. This causes uncertainty and often leads to disputes. A comprehensive agreement protects both parties.
2. Confusing employee and self-employed status
The perceived wisdom within the dental profession is that associates are self-employed. This means their written agreement needs to avoid provisions more commonly seen in an employment contract. Terms such as “employee”, “employed” and “contract of employment” need to be edited out of the written agreement. Certain provisions can help the contract to be construed as one of self-employment (but even these provisions are not, necessarily, conclusive). Ensure the associate is responsible for all tax and National Insurance liabilities arising from fees paid to them and that they agree to indemnify the practice owner against such liabilities. Also, ensure the associate has the right and obligation to arrange a locum to cover absence after an agreed period.
Be aware of the complications that can arise out of the following provisions:
Many agreements I see come very close to exchanging a salary from the practice owner to the associate for a defined time commitment. It is better to define the payment clauses by reference to a genuine “licence fee” paid by the associate to the practice owner in exchange for the right to treat patients at the premises.
Strictly speaking, a self-employed person should be entitled to unlimited holidays provided they arrange cover for their contracted duties. Usually most practice owners insert an entitlement clause to ensure continuity of patient treatment. I suggest you avoid a clause that simply imposes a defined number of holiday entitlements and says no more. Instead, I prefer a clause that states an associate can take a certain number of days’ holiday without arranging locum cover and thereafter a locum must be found. Notice requirements for holidays lasting more than a few days are also sensible.
As its name suggests, this clause requires the associate only to work at the practice owner’s premises. Again, this is problematic, as a self-employed person ought to be able to work elsewhere outside their contracted hours at the practice. Consider removing such a clause or, if such a provision is essential, modify it to read that the associate will not undertake any other duties which would be incompatible or conflict with their contracted duties.
3. Confusing payment provisions
Clearly, the most important clauses within the agreement include the ones which outline payments between the associate and practice owner. Frequently, insufficient time and thought is given to these key clauses. Often, liability for bad debts and laboratory fees are not dealt with at all. In NHS practices payment for UDAs and provisions for clawback are often unclear and confusing. Some practices pay their associates a set monthly payment on the assumption that a minimum number of UDAs are performed. Clawback provisions then need to be inserted to deal with under performance. However, such clauses often fail to deal with termination of the agreement part way through a year and under performance at that point.
Other practices pay their associates strictly on the basis of UDAs performed. This can avoid issues relating to over payment when the associate fails to hit UDA target. However, the agreement often then fails to make it clear that an associate will not be paid for any UDAs over and above an agreed figure. As a final tip, also make it a contractual obligation that the associate has to process claims for UDAs in accordance with NHS England’s timescales and other requirements: I have seen several disputes arising where claims for UDAs have been submitted late due to associate delay and subsequently been disallowed by NHS England.
4. Unenforceable binding out provisions
Binding out provisions (or restrictive covenants) seem to have a lot of myths about them. Most lawyers will hear the phrase, “binding out provisions are not worth the paper they are written on” a couple of times a year. This is simply wrong. A properly drafted and reasonable provision is perfectly capable of being enforced; the key thing is to ensure the clause imposes a reasonable non-compete restriction upon a departing associate. Start with the mindset that the practice owner has the economic power in the relationship and should not “over egg” the restriction. Approach with caution any restrictive periods lasting more than 12 months. Further, if all the practice patients come within a three-mile radius of the practice why is the practice owner requiring a 10-mile restriction zone? For the practice owner “less is probably more” when it comes to such provisions: better to have an enforceable clause than a draconian clause which will be struck down entirely.
5. Failure to review regularly
This follows on from the need to have a written agreement. NHS England’s procedures and requirements change often. The responsibilities and obligations of the associate may alter as they gain more experience within the practice. Such changes are often not matched by amendments to the associate’s written agreement. An annual audit ensures the agreement matches what is actually happening within the practice.