Associate agreements mistakes to avoid
Because your staff are your most important and expensive asset It makes sense to have proper contracts with them. Here we outline a few of the most common mistakes we see when reviewing associate 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 event 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.
In light of current case law developments, it is crucial the associate has an unrestricted right to instal a locum to substitute for the associate’s work. This is being seen as a key indicator that the associate is not an employee or worker. However, what is in the contract may not be enough on its own if the associate never, in practice, exercises the right to install a substitute locum. A court may infer the right to be a token one, if a substitute is never in fact appointed. As such you may want to encourage the associates to take up this right to show that the right to substitute is real.
3. 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.
4. 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.
