The Importance of Associate Agreements

Introduction to the FTC Ruling on Non-Compete Agreements

On April 23, 2024, the United States Federal Trade Commission (“FTC”) issued a final rule banning non-compete agreements. This ruling was a massive shift that bans future non-compete covenants between dental practice owners and employees as well as invalidating existing non-compete agreements after 120 days of this ruling.

Implications for Dental Practice Transitions

It is important to note that this ban on non-compete agreements does not impact dental practice transitions for buyers and sellers. Non-compete clauses are still enforceable with the sale of a business, thus preserving the transference of the patient base and goodwill to the buyer.

Potential Legal Challenges to the FTC’s Decision

It is likely that legal challenges could delay or invalidate the FTC’s ruling before the effective date of the ban. However, if the ruling stands as is, what impact will it have on associate agreements?

The FTC’s ruling does not change the importance for practice owners to have each associate doctor sign a written contract. Although the lack of non-compete clauses may no longer be included, below are ten important reasons to have a written employment contract in place.

Key Elements of a Written Employment Contract

1-Restrictive Covenants and Non-Solicitation

First, the contract acts as an essential restrictive covenant that protects practice owners regarding the non-solicitation of patients and staff.

2-Confidentiality of Patient Information

Second, the non-disclosure of information maintains the confidentiality of patient records, including patient contact information.

3-Ownership and Custody of Patient Records

Third, the practice owner is clearly identified as the custodian of the patient records, and the Practice is identified as the owner of the patient list.

4-Termination Clauses

Fourth, the agreement clearly states how to terminate the contract early, both for cause and without cause, as well as the notice requirements for termination.

5-Role Clarification and Scheduling

Fifth, the associate’s duties and intended schedule are clearly stated.

6-Exclusivity and Employment Conditions

Sixth, the agreement states an exclusivity requirement so that the associate is unable to work in another practice during the employment term without written permission.

7-Contract Duration and Renewal Terms

Seventh, the duration of the initial employment term is clearly stated and specifies any automatic renewals.

8- Compensation and Benefits

Eighth, the agreement states the associate doctor’s compensation and lists any benefits included with the position.

9-Employment Status: Contractor vs. Employee

Nineth, the associate is identified as either a contractor or an employee.

10-Special Provisions Unique to the Employment Relationship

Tenth, the contract states any special provisions that are unique to the associate position or relationship between the employee and employer.

Key Takeaways

Although non-compete agreements may be a thing of the past, written employment contracts will continue to be essential. It is important to have a well drafted employment contract that includes reasonable terms that are clearly understood by all parties. Although there is ample information available online, both the practice owner and associate doctor should seek legal advice from an attorney prior to entering into any contract.

Disclaimer: The information provided in this article does not, and is not intended to, constitute legal advice; instead, this information is for general informational purposes only. Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter and should refrain from acting on the basis of information on this site without first seeking legal advice from counsel in the relevant jurisdiction.

Are you considering selling a dental practice or selling an orthodontic practice? We can help you sell your dental practice for the greatest possible profit. See our sellers steps for more information.

Terry D. Watson, DDS, and Frank Brown, JD, LLM, are with ADS Watson, Brown & Associates, a dental practice transition consulting and brokerage firm in Dallas, TX. They are members of American Dental Sales and can be reached on the Contact Page.

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