Welcome
Legal Aspects Of
Optometric Practice
Pamela J. Miller, O.D., F.A.A.O., J.D.
Highland, California
Pamela J. Miller, O.D., J.D.
• Became owner: 1974
• Staff size: 3
• Member: AOA, former
member CA St. Bd. of
Optometry, National
Academies of Practice in
Optometry, staff O.D. San
Bernardino Co. Medical
Center
• SCCO 1973
Dr. Miller and staff
Mission statement: To provide premium
vision care by a warm, caring and supportive
doctor and staff
Legal terms you need to know
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Plaintiff
Defendant
Doctrine of informed consent
Duty to warn
Duty to mitigate
Document
The average reasonable person standard
Legal concepts you need to know
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Respondeat superior: Let the master answer
Deep pockets
Joint and severable liability
Res ipsa loquitur: The thing speaks for itself
Rebuttable presumption of negligence:
instrument causing injury was in defendant’s exclusive control
and the accident was one which ordinarily does not occur in
the absence of negligence
Documentation
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The most important piece of legal advice
Document completely but judiciously
Do not change, erase or alter a writing
Adding to a writing is permissible – sign, date,
state why you are adding to the document (ex.
new information, research, addendum, etc.)
Contract law
“A promissory agreement between two or more
persons that creates, modifies, or destroys a
legal relation.”
“An agreement consisting of a promise or mutual
promises which the law will enforce or the
performance of which the law in some way
recognizes as a duty.”
Contract basics
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Oral or written
Express or implied
UCC – commerce, goods
Statute of frauds
Contract statute of frauds
• “No action shall be maintained
on certain classes of contracts
or engagements unless there
shall be a note or memorandum
thereof in writing signed by the
party to be charged or his
authorized agent.”
• Personal services, sale of land,
etc.
Contract requirements
“Four corners of the document”
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Offer
Acceptance (mirror image)
Consideration
Parties with at least limited capacity (duress,
fraud, free will, mental capacity)
• Mutuality of terms
It’s as simple as
A Act
B Breach
C Consequences
D Damages
Damages
• Actual
• Compensatory
– Unforeseeable: future earnings
– Foreseeable: actual expenses,
retraining, lost wages,
counseling
• Nominal
• Punitive
Contracts you’ll encounter
• Real estate - office
Purchase rental
Lease
Rent
Construction
• Practice
Purchase
Partnership
Merger
Shared overhead
• Employment
Independent contractor
Employee
• Equipment
Purchase
Lease
• Third party provider
Panel member
Employee health care
Always read the fine print!
Pre-nup
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Pre-nuptial agreement
Pros and cons
Spousal involvement in business
Purchase/sale of office and assets
Protection from liability
Tax filing – married, filing separately
Keeping it separate vs. co-mingling
Legal entities
Solo
Partnership
it’s just you, all the way
Group
3 or more
Affiliation
Merger
Franchise
share overhead; separate (but equal?)
joint owners (equal?)
2 or more practices join
purchase the right to be part of a
larger organization in return for
specific privileges, expense sharing, etc
Hiring: Your responsibilities
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Human resources
Educate
Inform
Follow-up
Oversee
Evaluate and re-evaluate
Stop litigation before it starts
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Review your policies
Keep up on the law
Post required notices
Accept no nonsense
Set an example
Treat everyone equally and fairly
Watch your opinions
New hires
• Contract
• Office policy manual
• Verify education,
experience, references
• Background check, criminal
or court records
• Complete all hiring forms;
copy of right to work
verification; federal forms
• Introduce to office, duties
• Continued employment
predicated on successful
completion of physical and
drug test, if applicable
• Provide training
• Safety training; passwords,
keys, etc.
• Employee has opportunity to
explain or refute information
• Learning, not probationary
period
Independent contractor
or
associate
Independent contractor
• New practice owners often are also
independent contractors (or employees) in
other settings to supplement their income
• Clearly defined by the IRS
• Not an employee
• Responsible for all taxes and contributions
• Look to the relationship between the parties
Employee contracts
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Policy vs. contract
What should I include
What should I exclude
How comprehensive should it be
Court interpretation
Burden of proof
Employment at will
• Disclaimer
• Termination at any time
• With or without cause
Protect interests by
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Confidentiality agreements
Covenant not to solicit patients
Covenant not to solicit employees
Covenant not to compete during employment
Return of property upon leaving the practice
Beware of out-of-state corporations
Confidentiality agreement
Non-disclosure agreements
• Designed to protect the employer, seller or partner from
disclosure of trade secrets
– i.e. May contain trade secret protections
• Separate from non-competition clause
• May be severable from a non-compete agreement so
not to violate “right to work”
Confidentiality agreement
Non-disclosure agreements cont.
• Covenant not to compete arising from sale of
business or partnership dissolution may be valid
• Employers may not force an employee to sign a
covenant not to compete or a condition of
employment – unfair competition
• Look to geographic area, time, activity, public’s right
to receive care
• State court may differ from federal court
Covenants
• Covenant not to compete
• Competition agreement
Purpose: To protect practice value and goodwill
Covenant not to compete
• Restrictive or a restraint of trade
– Is it reasonable, consistent with public welfare and
bargained for pursuant to lawful contact?
• Goal is to prevent patient or record stealing or
punish someone who does
• Enforceable if reasonable in light of the facts
and circumstances
Covenant not to compete cont.
• Cannot restrain trade – cannot be too
restrictive and unfair to the parties involved or
public welfare
• Generally not honored in CA – check state law
– Reasonable time limit only long enough to enable
former employer or buyer to protect the practice
• Part of an employment contract, purchase
agreement, partnership or “pre-existing”
relationship
Compete clause
(Employees, partners, mergers, associates)
• Shows greater durability and enforceability
• Doctor #2 can leave doctor #1, BUT to practice in the
same town, he or she must pay X to #1
• Holds up in court
• Must have consideration
• Must be reasonable and specific
• Designed to mitigate damages
– liquidated damages
Boilerplate language
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Confidentiality
Employment at will
Privacy
Electronic media
Harassment
Discrimination
Zero tolerance
Employer
Taxes – 2008
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Paid by
FICA – social security
Medicare
SDI (CA)
Federal
State
SUI
ETT
Employer
6.20%
1.45%
3.4%
0.10% on 1st $7000
(employer training tax)
• Workers’ comp
Employee
6.20%
1.45%
0.08%
schedule
schedule
schedule
Hire to fire documentation
• Handbooks – policy manual
• Handbooks vs. Application
• Be understanding of personal
problems
• Supervisor Training
• Evaluations – written warnings;
document
• Communicate, communicate,
communicate
• Don’t stress out
• Consistency – praise &
suggestions for
improvement
• Resignation
• Post-Termination
• No surprises
• No discussion once
termination is necessary –
end of day, end of pay;
stand and escort to door
• Return keys, change codes
Hire defensively
• Be specific about rules
• Be vague about rights
– Progressive discipline policies
• Oral warnings
• Written warnings
• Suspensions
• Terminations
Employment application
• Authorizations
– Background check
– Reference check
– Drug & alcohol testing
– Certification that all info provided by
applicant is true
Successfully enforce policies
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Don’t ignore a situation or conflict
Take action to achieve resolution
Document your actions
Employee should sign all performance
reviews & keep a copy
Pyramid any disciplinary measures if possible
Develop a game plan
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Address a complaint or issue immediately
Employee rights
Following through - consistency
Posting
Right of Privacy
Annual review - Do not puff
Review/update office policy manual periodically
Boilerplate language
• Employment at will
• “Employees are forbidden from disclosing,
taking, or copying confidential
information”
• “Zero tolerance”
• Right of privacy
• ADA - “reasonable accommodation”
What is sexual harassment or
discrimination?
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Unwanted and offensive touching
Objectionable behavior
Unwelcome sexual advances
Requests for sexual favors
Boss has no special right
Hostile environment
Protect yourself
• Prompt and effective action to end alleged
harassment after complaint
• Employee must make a complaint
• If no action is taken to resolve the complaint,
the employee may sue and receive actual
damages, court costs, attorney’s fees, and
even punitive damages for willful violation
RED YELLOW GREEN
• RED: Not allowed - always
unacceptable
• YELLOW: Questionable Usually unacceptable or
inappropriate
• GREEN: Allowed - acceptable
The golden rule
• All employees must be treated with dignity
and mutual respect
• By everyone, at all times
• You set the example and are responsible for
the whole office
Office illness and injury
prevention manual
Leases & purchase agreements
Equipment
Real property
Practice
Equipment lease
• Lease purchase – annual tax paid
– $1 buy out or fair market value buy out
– May be higher cost; shown as expense
– Doesn’t show as an asset or liability
• Outright purchase vs. finance
• Write-off value: depreciation per year
• Lease without option of purchase
Office lease considerations
• Mistake to pay operating expenses based on leased
space rather than on leasable space
• Lease rate: rent + operating expenses and how
calculated; increases
• Maintenance and upkeep; remodeling
• Amount of free rent
• Length of time space has been available; %
occupancy; length of current tenant’s leases, lease
incentives to current residents
• Any exclusionary businesses (i.e. other optical)
Office lease considerations cont.
• In event of fire, loss of use, loss of space/contents;
remodeling, improvements, change of entrances,
relocation; hours of business; square footage, parking
• Termination clause – right to sublet
• Tax indemnification clause
• Ownership change; buy-out clauses and
down payments
• Insurance specifications
• Warranties on premises, equipment, etc.
• Included services, signage, hours of operation
Is it better to purchase or own?
• Real property
– Purchase outright
– Finance
– Lease to own
• Equipment
– Purchase outright
– Finance
– Lease to own
• Employees
Practice purchase or sale
• Lump sum is not the best option
• Serial sale: interest on sale is paid monthly (with
principal). Tax may be computed on this interest – as
a gift tax against the selling doctor unless the interest
is already worked into the price
• Structured sale (best option): buyer has option to
speed up payments
• Check with your accountant and tax attorney
Own your own
Advantages
– Cash accounting system
– Liability mitigation: notice not required
– Control
Disadvantages
– Repair and upkeep
– Annual price hikes or upon lease renewal
– Liability
Partnerships
Protect your partnership
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Choose wisely, carefully, consider a “trial run”
Balance the work load; establish your roles
Compromise
Have a contingency plan
Consult an attorney and put it in writing
Communication is important to avoid a divorce
Keep your spouse out of the business
Considerations
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Events causing termination of a relationship
Retirement
Voluntary termination to leave
To start a competitive practice
Involuntary termination –principals disagree
Death
Disability
Felony conviction – loss of license
Partnership contracts
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Name, time commitment; prohibited acts, duration
Contributions, allocations & cash flow
Loans & leases; partnership sale or adding new partner
Income, expenses, capital expenditures & withdrawals
Books & records
Competition agreements
Partner relations – death, disability, buy out,
resignation
• Insurance: how to be paid?
Read carefully
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Document everything
Never argue; never yell
Never get angry
Do your research
Don’t be greedy
Remember, act in haste, repent in leisure
Plan and prepare for the worst
Going for help
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State chamber of commerce
Professional associations
Buying groups
State/federal employment agencies
To do list
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Take a basic tax preparation class
Select a CPA for small businesses
Review contracts and categorize by topic
Create a profit-and-loss statement
Set 5- & 10-year financial & practice goals
Write or re-evaluate office policy document
Establish emergency protocols
Develop a mentor relationship
References
• Classe, John, O.D., J.D. - Legal Aspects of
Optometry
• Dufour, James T. - Optometric Office Injury&
Illness Prevention Guide
• Miller, Pamela J. O.D., J.D. - A Handbook for the
Ophthalmic Practice Documentation and Record
Keeping Made Easy
• AOA
References cont.
• Primary Eyecare Network - Personnel File
Desk Reference Set
• Steinberg, Craig S. O.D., J.D. - Employer’s
Guide for Optometrists
• The Optometric Office and Illness Prevention
Guide - Vision West
• California Compliance Catalog–
www.calbizcentral.com
Thank you
Pamela J. Miller, O.D., F.A.A.O., J.D.
909.862.4053
drpam@omnivision.com