The days of trusting oral agreements are over. Get everything in writing.
By Richard S. Kattouf, O.D.
Q Seven years ago, I joined an independent practice with the promise of becoming a part owner in no less than three years. Now the owner isn't cooperating. I would appreciate any advice you have.
Dr. L. M. Ashley, Via e-mail
A: Dr. Ashley's situation is, unfortunately, a common problem because most associates have no contract upon entering employment. That's why it's beneficial for both the owner and the associate to have a legal contract that spells out all of the issues that they agree upon. The issues addressed in the agreement should include:
- Financial compensation of associate
- Who pays for continuing education
- Who pays for license renewal
- Defined vacation time
- Who pays for malpractice insurance
- Number of hours in a workday. Define any financial compensation if associate works more than one hour over scheduled time
- Whether financial compensation is hourly or based on production
- The exact time frame when the associate will be given opportunity to buy in
- When to calculate fair market value of practice (before or after the associate begins producing income for the practice)
- Who pays for health insurance
- Who owns the records and the associate's level of access to them
- Restrictive covenant.
Including these issues in a legally binding agreement leaves no room for interpretation. Consider the following example.
IMAGE BY SUZANNE & NICK
Revealing a broken promise
Dr. Bond called my company and explained that she'd been an employee of a practice for eight years. Upon first hiring her, the owner verbally promised Dr. Bond the opportunity to buy in after three years of employment. Not only had the owner not made good on his promise, but he also hadn't given Dr. Bond a pay raise in three years. In a situation such as this, both parties are to blame. Dr. Bond had enabled the owner to take advantage of her. Despite this, the situation had to change.
Dr. Bond hired me as a consultant to appraise the practice and to negotiate the buy-sell agreement. The owner wanted to sell 100% of the practice and both parties agreed on the fair market value that I calculated. In the negotiation process, the owner wanted to stay on as a private contractor or an employee. However, the owner demanded an annual income of $125,000 and in working the numbers, it wasn't affordable for my client to pay off the practice and "guarantee" the senior doctor a salary of that magnitude.
The senior doctor wouldn't budge. Because the two had no contract and no restrictive covenant, I advised Dr. Bond to leave and open her own practice. I developed a "start up" consultation program and with proper marketing of Dr. Bond's patients and implementation of my consulting, she outperformed the senior doctor in gross collections in her first year.
Stand up for your rights
Remember: Associate contracts are essential. Don't enable this kind of situation, no matter what side you're on, and don't be afraid to exercise your rights.
Dr. Kattouf is president and founder of two
management and consulting companies. For information, call (800) 745-EYES
or e-mail him at firstname.lastname@example.org.
The information in this column is based on actual consulting files.
Optometric Management, Issue: June 2004