By Dr. Kyla Romard
NSDA Clinical Affairs Manager

As we transition from winter to spring, many of our honorary NSDA student members are gearing up for an exciting new ‘season’ of their own, shifting from students to practicing dentists.

To help new members navigate the early stages of their careers and better understand the resources their association has to offer, students are invited to attend an introductory session with NSDA staff, hosted via Zoom.

Among the resources touched upon during these welcome meetings is a five-part series of documents created by the NSDA in partnership with Cox & Palmer. These materials are designed to help dentists make intelligent practice decisions through all phases of their careers.

The series includes:

• Part 1: Purchase & Sale of Dentistry Practice (it is here that associates will find an example of a typical associate contract)
• Part 2: Employment Guidelines for Dental Practices
• Part 3: Financial & Taxation
• Part 4: Dealing with Patient Dental Benefits
• Part 5: Insurance Audits

Of course, cracking open a five-part series on the business of dentistry might feel a bit overwhelming, especially for those finishing up dental school or embarking on their first year of practice. What follows are a few common questions new members often seek advice on.

‘Why is it important to have an associate agreement?’

Associate agreements between principal dentists and their hired associates are vital. These documents define the terms of the working relationship in a way whereby both parties understand clearly their roles and responsibilities to one another.

At the rosy onset of a business alliance, it might be difficult to believe that a relationship could ever sour. However, disagreements can occur and, without proper contracts in place, resolution may prove difficult.

Never sign an agreement that has terms you are uncomfortable with. It may be possible to negotiate more favourable conditions, but, in some cases, it might in your best interest to leave the agreement on the table. Obtaining legal advice (though seemingly an added expense) can help you fully understand your rights and obligations, and save you money in the long term.

Important terms outlined in associate agreements include (but are not limited to):

• How will you be compensated for your work?
  • Salary?
  • Percentage of billings?
  • Percentage of collections?
  • Benefits (e.g. health insurance)?
  • Vacation time?
• Will you have control over the treatment you provide?
  • Will the principal dentist control your treatment plan?
  • Can you refer patients to specialists or other general dentists outside the practice at your own discretion?
  • Are there production targets you are required to meet?
• Can you give input in regards to important business decisions, such as staff recruitment or termination?
• What are the obligations of the principal and associate should either party want to terminate their working relationship?
• Who is responsible for the purchasing of supplies? Will the associate be able to choose the provisions they deem necessary for the procedures they will be performing?
• Will the associate have the ‘right of first refusal’ should the practice owner want to sell?

‘What is the difference between an independent contractor and an employee?‘

Perhaps the most important consideration in associate agreements is the determination of whether the associate will be hired as an independent contractor or an employee.

In most cases, associates operate as independent contractors and are in business for themselves, with their rights governed by the terms agreed to in the written contract. However, if these terms are not carefully structured in the written contract and implemented in the working relationship, significant tax and legal ramifications can occur for both parties.

Factors that should be considered when determining the structure of the business relationship include (but are not limited to):

• The level of control the principal dentist has over the associate in regards to patient treatment
• The associate’s risk of loss from patient treatment
• The associate’s opportunity for profit from patient treatment
• How the associate is paid
• Whether or not the associate can hire/terminate staff
• Whether or not the associate is free to work at other practices

Should an associate sue the principal for wrongful dismissal, as an example, and the associate is deemed to be an employee and not an independent contractor, legal consequences under such acts as the Nova Scotia Labour Standards Code and the Human Rights Act can be detrimental for the principal dentist. Substantial monetary loss can also occur if the associate is considered an employee, as the principal dentist will be responsible for paying Canada Pension Plan (CPP), Employment Insurance (EI), and income tax on the associate’s wages.

‘I’m leaving to work at another practice nearby. Can I do this and can I take my patients with me?‘

Most associate agreements will have restrictive covenants in the written contract that include a non-compete clause, a non-solicit clause, or both.

Non-compete clauses act to prevent the associate from leaving the practice to work nearby, either as a practice owner or associate at another local office. For example, a non-competition clause may prohibit an associate from practicing within a 10-kilometre radius of the principal for one year following the termination of the associate agreement. Non-compete clauses can be highly scrutinized by the courts, as they cannot restrict an employee’s ability to earn a living.

Non-solicitation clauses prevent the associate from soliciting patients, employees, and referral sources of the practice in order to increase their services and production at a new location. Non-solicit clauses are more frequently upheld in court, provided they are reasonable, as they are less restrictive than their non-compete counterparts.

An important consideration in regards to non-solicit clauses is that, while you may not be able to legally seek out your former patients, both the associate and the principal dentist need to abide by the patient’s rights under the Personal Health Information Act (PHIA) and the Personal Information Protection and Electronic Documents Act (PIPEDA). Should a patient request treatment from the associate at their new location of practice, the principal dentist is legally required to release the patients charts to the associate dentist.

‘I’m starting my own practice or buying from a retiring dentist and must sign a premises lease. What should I look for?‘

Most premises leases are standard; however, there are a few scenarios that can undermine the value of your practice. In most cases, problems will arise in the early due diligence of a practice purchase.

What follows are a few of the many important points to consider when signing a lease:

• Relocation clauses: These are, ideally, structured to prevent the landlord from being able to move you to a new location that may affect your practice revenue and be detrimental to your business. In cases where relocation may be unavoidable, you will want the landlord to be responsible for any moving and building-out expenses.
• Practice expansion clauses: You will want the ‘right of first refusal’ when adjacent space becomes available in order to expand your practice and increase growth and production.
• Damage and destruction clauses: In cases of fires or flooding, it is important to know who is responsible for the damage to the building and what the landlord’s obligations are in regards to relocation and reconstruction.
• Business growth: You will want to ensure the lease agreement allows you to bring in associates and expand your service offerings should you want your practice to grow accordingly.
• Selling or transition clauses: You will want a lease agreement that allows you to sell the practice and retire, as some leases can prevent this or entitle the landlord to proceeds of the practice sale.

In addition to the new member meetings mentioned at the beginning of this column, the NSDA recently added a variety of videos, webinars, and online CE to its website. Some notable videos for new members include “NSDA’s Member Benefits,” “The NSDA Suggested Fee Guide,” “Patient Communication,” and “Associate Agreements”!