Written associate agreements

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Faisal Dhalla, a partner in Hempsons’ corporate commercial team, discusses why a written associate agreement is essential for dental practice owners and associates alike

Professional life for a practice principal - with all the complexities of regulations, evolving standards and ever-changing government guidelines, can seem anything but simple. So why should appointing a new associate to help you with the workload be any different?

In a perfect world, dentists and their associates would work alongside each other in perfect unison, and many do. However, there are a rising number of cases where a relationship based on mutual respect or friendship has turned sour and that contract-replacing handshake is simply not enough.

This is why it is incredibly important to formalise the working relationship with a written associate agreement, not only to eliminate confusion in the practice, but also to provide everyone involved with a legal point of reference, in case of any disputes.

Ancient history

In ‘the good old days’, an associate agreement was formed with little more than a handshake. However, these days, this is simply not enough. Hempsons see cases every day where a disgruntled associate or practice principal has come to us for advice on a dispute over clinical standards, goodwill, notice periods and even annual leave entitlement. The problem we invariably face is that no associate agreement has been put into place.

Imagine this: you are a practice principal whose longstanding associate has left the practice and opened another one close by. As a result, a considerable number of patients have followed the associate, leaving you with a huge deficit in your top line profits. However, because there was no written associate agreement in place, complete with restraint and barring-out clauses, you are likely to be facing a lengthy lawsuit. The financial impact on you in terms of loss of goodwill and your practice turnover is likely to be significant.

Prevention is better than cure

The dental mantra is that ‘prevention is better than cure’ and legal business matters should be treated in exactly the same way. The difficulty is that, often, principals and associates feel that a written agreement is not necessarily needed, as they are great mates who are mutually respected – until it is too late.

Think of your associate agreement in the same way as a pre-nuptial agreement. You may not feel that you need it now, but what happens further down the line? We are frequently asked for advice regarding breakdowns in the relationships between principals and associates. Again, in the majority of cases, there is no written agreement in place.

Therefore, a written agreement, clearly setting out the terms under which a licence is granted to the self-employed associate, offers both parties security as well as clarity in the professional working relationship. This should cover topics such as:
• Rights and responsibilities of the parties
• Facilities provided
• Hours that facilities are available
• Absences including holiday leave, maternity/paternity leave, sickness, etc.
• Fee assignments, if appropriate
• Remuneration details (split between NHS and private)
• Ownership of goodwill
• Restraint and barring-out clauses after leaving the practice
• Commencement and termination details
• Locum arrangements

Associates in a practice can also often treat lists of payment plan patients that are registered to the principal, so it is important to know where both parties stand when it comes to goodwill, should the associate decide to move on.
Model agreements are readily available from sources such as the BDA. However, these may well need adaptation to suit individual circumstances, and both parties would be well advised to seek individual legal advice from advisers conversant with the dental profession before committing to the agreement.

As I am sure you will now agree, the problems that can arise from not having an appropriate associate agreement in place are seemingly endless, which is why they are so essential. You would not think of employing a member of staff without a contract or something in writing, so your associate should not be any different. Prevent legal issues now – or you may be faced with a lengthy battle in the future.

Author

Faisal specialises in corporate and commercial law and advises a wide range of public and private sector organisations on mergers, acquisitions, and disposals; restructuring; joint ventures and commercial contracts.
Faisal has a particular specialism in acting for dentists in the sale and purchase of dental practices and the incorporation of dental body corporates. He also advises on the preservation of NHS dental contracts and the ways in which these can be transferred from seller to buyer in the sale and purchase of a dental practice.

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