1 Getting or Buying a Job! The Basics of Associate Agreements and Practice Purchase Agreements Gary Baumwoll, Esq. Baumwoll Law 390 Route 10 West Randolph, NJ University of Florida January 11, 2014

About Me Princeton University, A.B., 2002 Princeton University, A.B., 2002 Rutgers School of Law, J.D., 2007 Rutgers School of Law, J.D., 2007 Attorney specializing in legal issues in the practice of dentistry, including practice transitions, employment contracts, partnership agreements, leasing issues Attorney specializing in legal issues in the practice of dentistry, including practice transitions, employment contracts, partnership agreements, leasing issues

3 Understanding Employment Contracts and Purchasing a Practice This presentation is designed to highlight some of the legal issues in employment and purchase contracts. We will explore the issues from the perspective of both the employer and employee and the owner and purchaser. This presentation is designed to highlight some of the legal issues in employment and purchase contracts. We will explore the issues from the perspective of both the employer and employee and the owner and purchaser.

Why Hire an Associate? Excessive patient load Excessive patient load Desire to reduce workload Desire to reduce workload Transition imminent Transition imminent

Why NOT to Hire an Associate Professional companionship Professional companionship Expectation of growth Expectation of growth Desire to keep all procedures “ in house ” Desire to keep all procedures “ in house ” Locked-in buyer Locked-in buyer Better utilization of overhead Better utilization of overhead

Employing an Associate When hiring or becoming an associate, a written employment agreement is strongly suggested. When hiring or becoming an associate, a written employment agreement is strongly suggested. If a post-association transition is planned, the agreement should address the basic terms. If a post-association transition is planned, the agreement should address the basic terms.

Elements of an Employment Agreement services and duties services and duties term and termination term and termination compensation compensation employee expenses employee expenses days off days off Representations malpractice insurance restrictive covenants ownership potential legal remedies

Services and Duties of Employee  hours and days  call schedule  administrative duties  professional and promotional activities  study groups  outside employment

Term of Agreement  length of employment (usually one year)  employment at will  renewal status  self-renewing  self-extinguishing

Termination of Agreement death death disability, full/partial disability, full/partial for cause for cause without cause without cause at discretion of employer at discretion of employer

Compensation of Employee  salary vs. hourly vs. per diem  bonus system  percent of production or collection  percent vs. base per diem  pension, health, fringe benefits  auto  call schedule  promotional activities

Employee Expenses  Auto (?)  cell phone  continuing education  practice promotion  professional association dues

Malpractice Insurance  occurrence vs. claims made  tail coverage  prorated premium for part-time work  same carrier as employer if possible

Restrictive Covenants  access to and return of confidential information (patient list)  non-compete clause  non-solicitation clause  reasonable time and distance

Restrictive Covenants  Damages  actual  liquidated  Remedies  injunction  financial payment

Ownership Interest or Potential  No interest or potential for any interest  “ sweat ” equity  gradual buy-in

Boilerplate Provisions notice notice governing Law governing Law assignment assignment entire agreement entire agreement headings headings severability severability third-party beneficiaries third-party beneficiaries pronouns pronouns

Independent Contractor vs. Employee The IRS Rule: The IRS Rule: The Owner has the right to control or direct only the result of the work done by an independent contractor, and the not the means and methods of accomplishing the result. The Owner has the right to control or direct only the result of the work done by an independent contractor, and the not the means and methods of accomplishing the result.

Independent Contractor vs. Employee Taxes without current payroll tax cut Taxes without current payroll tax cut Independent Contractor: Worker has to pay the matching payroll tax = 7.5% Independent Contractor: Worker has to pay the matching payroll tax = 7.5% Employee: Owner has to pay the matching payroll tax = 7.5% Employee: Owner has to pay the matching payroll tax = 7.5%

Independent Contractor vs. Employee When in doubt… When in doubt… The Worker = Employee

Types of Dental Practice Transitions 100% Purchase of Practice With or without prior associations with the practice Partial Buy-In of Practice With or Without prior associations with the Practice

Documents for 100% Purchase of Dental Practice Asset Purchase Agreement Bill of Sale Lease Employment Agreement Corporate Formation

Documents for Partial Buy-In Purchase of Dental Practice Asset Purchase Agreement Bill of Sale Operating Agreement Lease Employment Agreements Loan Documents Corporate Formation

Some Important Dental Issues to be Addressed by an Attorney Seller’s warranties Assets being sold/Allocation Prepaid Accounts/Fee Schedule Accounts receivable Lease Indemnification Adjustments Closing contingencies

Seller’s Warranties Practice is in compliance with all laws, rules and regulations Practice is in compliance with all laws, rules and regulations There will be at least 30 days worth of supplies in the office on the Closing Date There will be at least 30 days worth of supplies in the office on the Closing Date All equipment and fixture are in good working order on the Closing Date All equipment and fixture are in good working order on the Closing Date

Asset Being Sold/Allocation Furniture, Fixture and Equipment Furniture, Fixture and Equipment Good for Purchaser – Very bad for Seller Good for Purchaser – Very bad for Seller Supplies and Inventory Supplies and Inventory Good for Purchaser – Very bad for Seller Good for Purchaser – Very bad for Seller Goodwill Goodwill Bad for Purchaser – Very Good for Seller Bad for Purchaser – Very Good for Seller Restrictive Covenant Restrictive Covenant Bad for Purchaser – Very bad for Seller Bad for Purchaser – Very bad for Seller

Prepaid Accounts/Fee Schedule Crowns, Bridge and Prosthetics Preparation25% Impression25% Try-in25% Insertion25% Orthodontic Prepaids are very important numbers to know. Orthodontic Prepaids are very important numbers to know.

Accounts Receivable Accounts receivable are the fees owed to the Seller for work completed before Closing Accounts receivable are the fees owed to the Seller for work completed before Closing Seller usually keeps accounts receivable Seller usually keeps accounts receivable Accounts receivable can be offset by prepaids Accounts receivable can be offset by prepaids An average amount is 60 to 90 days of collection An average amount is 60 to 90 days of collection

HUDSON CAREER COUNSELING

How to Choose and Work with an Attorney

Choosing an Attorney Attorney is your advocate and can represent only you. Attorney is your advocate and can represent only you. Probe for possible conflicts of interest. Probe for possible conflicts of interest. Attorney can be hired by both parties to mediate and draft a mutually-agreeable contract, but... Attorney can be hired by both parties to mediate and draft a mutually-agreeable contract, but... Each party must then hire a personal attorney to review contracts. Each party must then hire a personal attorney to review contracts.

Attorney must... be familiar with dental practice employment issues be familiar with dental practice employment issues be knowledgeable about dental issues be knowledgeable about dental issues have excellent references have excellent references

Working with an Attorney Do your homework--be prepared Do your homework--be prepared Plan early Plan early Be your own best advocate Be your own best advocate Be reasonable Be reasonable Be the client you would want as a patient Be the client you would want as a patient Avoid false economies Avoid false economies Pay your bill Pay your bill

Working with an Attorney: Your attorney is your ally but not your friend. Your attorney is your ally but not your friend. You have a business relationship. You have a business relationship. You are are paying for attorney ’ s time. You are are paying for attorney ’ s time. Each phone call costs you money. Each phone call costs you money. Stay on point (make small talk off-the-clock). Stay on point (make small talk off-the-clock). Even a “ busted ” deal costs you money. Even a “ busted ” deal costs you money. There is no such thing as a “ quick peek. ” There is no such thing as a “ quick peek. ”

Working with an Attorney: Legal Costs Written agreement outlining fees: initial retainer (refundable if unearned) initial retainer (refundable if unearned) hourly: $300 - $425/hr hourly: $300 - $425/hr flat fee: $1,000 - $1,500 flat fee: $1,000 - $1,500

Terminating the Attorney/Client Relationship successful completion of transaction successful completion of transaction unsuccessful transition unsuccessful transition conflict with attorney conflict with attorney

Disclaimer This information is not intended as a substitute for legal advice. You should familiarize yourself with the laws of your local jurisdiction and seek legal advice from a local attorney who specializes in such matters.

If you have a question or need a copy of the handout contact me at: Gary Baumwoll, Esq. 390 Route 10 West Randolph, NJ

39 Get a Job! Gary Baumwoll, Esq.