Irrespective of what contract is being offered, unless any of its terms are unlawful, they will likely be binding (and possibly, binding in unanticipated ways if they are unclear). If you don’t understand the contract terms, then get legal advice.
In this article, we highlight some of the more fundamental contract elements you should identify.
How is the relationship characterised in the contract?
Dental practices contract with dentists in three main ways:
- as an employee (uncommon);
- as an independent contractor providing services to the dental practice’s patients;
- as a facilities and services provider enabling the dentist to operate a solo dental practice from the consulting rooms along with other dentists.
The rights and obligations under each type of contract may be different. For example, employee dentists will be entitled to usual minimum employment terms such as paid leave – even if they are paid on a commission only basis. Contractor dentists generally have additional responsibilities. Dentists engaging a practice to provide facilities and services will not be entitled to employment terms, superannuation or workers compensation.
What are the obligations of each party, as set out in the contract
Don’t make assumptions about what each party’s obligations will be under the contract. If it is not specified in contract, there may be no entitlement to a benefit. For example, only employees have an entitlement to parental leave (provided they have served the qualifying periods) or paid leave such as paid annual leave.
Once you have verified the type of contractual relationship, a good place to start is to identify the performance obligations of both parties – that is, what they agree to do and whether the contract terms contain any warranties and indemnities that might add to the cost of performing the services under the contract. You should also consider whether any required insurances are obtainable and the cost of maintaining those insurances.
Remuneration
Consider how the contract states you are remunerated. As an employee or as an independent contractor, you will typically receive a percentage of the billings/receipts collected from patients after laboratory fees are taken out. Consider whether you are paid on the basis of billings or receipts. If you are paid on the basis of billings you do not have to bear part of the burden if the patient does not pay or is late to pay.
If you have entered into a facilities and services agreement, typically you will be charged a facilities and services fee as a percentage of the billings/receipts that are collected from patients after laboratory fees are deducted. If the charge is based on billings, then you will be paying a fee even though a patient or the treatment funder may not have paid the bill.
Consider how often the payments are made to you – weekly, fortnightly or monthly and what that will mean for your cash flow. As to reconciling the remuneration, does the contract confirm that you will be provided with a breakdown of billings, receipts and deductions.
Consider also whether and to what extent the practice may withhold or retain payments it owes to you. Retention of payments are not uncommon should be applied fairly and for proper reasons. However, if there is a dispute about payments consider how you might want these disputes to be resolved and whether undisputed payments should be paid to you during the dispute resolution process.
Contract termination
What are the contractual terms for ending the contract? Are you entitled to end the contract if the practice breaches the contract, or do you have go through an onerous dispute resolution process? In some cases, you may not be entitled to end the contract at all and ceasing to provide services could expose you to a legal claim for damages.
If a party wishes to terminate the contract, how much notice is required. Very long notice periods make it hard to exit the practice and move on. For example, if you have to give six months notice if you want to leave, will it be possible to secure a position 6 months ahead of time? Also, check whether the notice periods are the same for both sides.
Restraints of Trade
It is common for practices to want to protect goodwill when the contract with the dentist ends. This is usually achieved through the insertion of restraint of trade clauses into the contract. These clauses prevent the restrained party from providing dental services within a particular radius for a specified length of time. Do not assume that these clauses are unenforceable. Very often, the restraints will satisfy a test of legal reasonableness and be enforceable against the departing dentist.
You should consider what type of restraints apply and whether they are too limiting or whether they would be something that you could live with. Common types of restraints include no soliciting of patients and employees, no dealing with patients and restraints preventing a dentist from practicing at all within a specified area for a period of time.
Dentists in regional or rural locations should be particularly careful when entering into contracts that prohibit them from practicing for a lengthy period in the area because leaving the job may also mean having to leave town to be able to earn a livelihood. No dealings clauses which provide that you will not render services to the practice’s patients for a defined period of time might be a more tolerable restraint that satisfies the needs of both parties.
Additionally, you should consider whether you require a contractual right to copies of clinical records if they are needed in the future to defend legal proceedings or complaints from patients.
What if you are unhappy with the contract terms?
Before you enter into the contract, if you are unhappy with the contract terms what can you do?
- Try to negotiate – ask for terms to be amended, deleted, or added in.
- If you can’t get the contract amended, consider whether to walk away.
