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 07869
973-723-6115
gbaumwoll@gmail.com
www.LawyerForDentists.com
University of Florida
January 11, 2014
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About Me
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Princeton University, A.B., 2002
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
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.
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Why Hire an Associate?
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Excessive patient load
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Desire to reduce workload
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Transition imminent
Why NOT to Hire an Associate
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Professional companionship
Expectation of growth
Desire to keep all procedures “in house”
Locked-in buyer
Better utilization of overhead
Employing an Associate
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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.
Elements of an
Employment Agreement
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services and duties
term and termination
compensation
employee expenses
days off
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Representations
malpractice insurance
restrictive covenants
ownership potential
legal remedies
Services and Duties of Employee
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hours and days
call schedule
administrative duties
professional and promotional activities
study groups
outside employment
Term of Agreement
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length of employment (usually one year)
employment at will
renewal status
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self-renewing
self-extinguishing
Termination of Agreement
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death
disability, full/partial
for cause
without cause
at discretion of employer
Compensation of Employee
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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
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Auto (?)
cell phone
continuing education
practice promotion
professional association dues
Malpractice Insurance
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occurrence vs. claims made
tail coverage
prorated premium for part-time work
same carrier as employer if possible
Restrictive Covenants
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access to and return of confidential
information (patient list)
non-compete clause
non-solicitation clause
reasonable time and distance
Restrictive Covenants
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Damages
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actual
liquidated
Remedies
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injunction
financial payment
Ownership Interest or Potential
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No interest or potential for any interest
“sweat” equity
gradual buy-in
Boilerplate Provisions
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notice
governing Law
assignment
entire agreement
headings
severability
third-party beneficiaries
pronouns
Independent Contractor vs.
Employee
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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.
Independent Contractor vs.
Employee
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Taxes without current payroll tax cut
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Independent Contractor: Worker has to pay
the matching payroll tax = 7.5%
Employee: Owner has to pay the matching
payroll tax = 7.5%
Independent Contractor vs.
Employee
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When in doubt…
The Worker = Employee
Types of Dental Practice Transitions
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100% Purchase of Practice
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With or without prior associations with the practice
Partial Buy-In of Practice
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With or Without prior associations with the Practice
Documents for 100% Purchase of
Dental Practice
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Asset Purchase Agreement
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Bill of Sale
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Lease
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Employment Agreement
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Corporate Formation
Documents for Partial Buy-In
Purchase of Dental Practice
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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
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Seller’s warranties
Assets being sold/Allocation
Prepaid Accounts/Fee Schedule
Accounts receivable
Lease
Indemnification
Adjustments
Closing contingencies
Seller’s Warranties
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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
All equipment and fixture are in good
working order on the Closing Date
Asset Being Sold/Allocation
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Furniture, Fixture and Equipment
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Supplies and Inventory
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Good for Purchaser – Very bad for Seller
Goodwill
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Good for Purchaser – Very bad for Seller
Bad for Purchaser – Very Good for Seller
Restrictive Covenant
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Bad for Purchaser – Very bad for Seller
Prepaid Accounts/Fee Schedule
Crowns, Bridge and Prosthetics
Preparation
25%
Impression
25%
Try-in
25%
Insertion
25%
Orthodontic
Prepaids are very important
numbers to know.
Accounts Receivable
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Accounts receivable are the fees owed to the
Seller for work completed before Closing
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Seller usually keeps accounts receivable
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Accounts receivable can be offset by prepaids
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An average amount is 60 to 90 days of collection
HUDSON CAREER COUNSELING
How to Choose and
Work with an Attorney
Choosing an Attorney
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Attorney is your advocate and can
represent only you.
Probe for possible conflicts of interest.
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.
Attorney must . . .
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be familiar with dental practice
employment issues
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be knowledgeable about dental issues
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have excellent references
Working with an Attorney
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Do your homework--be prepared
Plan early
Be your own best advocate
Be reasonable
Be the client you would want as a patient
Avoid false economies
Pay your bill
Working with an Attorney:
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Your attorney is your ally but not your friend.
You have a business relationship.
You are are paying for attorney’s time.
Each phone call costs you money.
Stay on point (make small talk off-the-clock).
Even a “busted” deal costs you money.
There is no such thing as a “quick peek.”
Working with an Attorney:
Legal Costs
Written agreement outlining fees:
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initial retainer (refundable if unearned)
hourly: $300 - $425/hr
flat fee: $1,000 - $1,500
Terminating the Attorney/Client
Relationship
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successful completion of transaction
unsuccessful transition
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 07869
973-723-6115
gbaumwoll@gmail.com
www.LawyerForDentists.com
Get a Job!
Gary Baumwoll, Esq.
gbaumwoll@gmail.com
www.LawyerForDentists.com
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