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Getting or Buying a Job! The Basics of Associate Agreements and Practice Purchase Agreements

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. About Me.

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Getting or Buying a Job! The Basics of Associate Agreements and Practice Purchase Agreements

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  1. 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

  2. About Me • 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

  3. 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.

  4. Why Hire an Associate? • Excessive patient load • Desire to reduce workload • Transition imminent

  5. Why NOT to Hire an Associate • Professional companionship • Expectation of growth • Desire to keep all procedures “in house” • Locked-in buyer • Better utilization of overhead

  6. Employing an Associate • 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.

  7. services and duties term and termination compensation employee expenses days off Representations malpractice insurance restrictive covenants ownership potential legal remedies Elements of anEmployment Agreement

  8. Services and Duties of Employee • hours and days • call schedule • administrative duties • professional and promotional activities • study groups • outside employment

  9. Term of Agreement • length of employment (usually one year) • employment at will • renewal status • self-renewing • self-extinguishing

  10. Termination of Agreement • death • disability, full/partial • for cause • without cause • at discretion of employer

  11. Compensation of Employee • 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

  12. Employee Expenses • Auto (?) • cell phone • continuing education • practice promotion • professional association dues

  13. Malpractice Insurance • occurrence vs. claims made • tail coverage • prorated premium for part-time work • same carrier as employer if possible

  14. Restrictive Covenants • access to and return of confidential information (patient list) • non-compete clause • non-solicitation clause • reasonable time and distance

  15. Restrictive Covenants • Damages • actual • liquidated • Remedies • injunction • financial payment

  16. Ownership Interest or Potential • No interest or potential for any interest • “sweat” equity • gradual buy-in

  17. Boilerplate Provisions • notice • governing Law • assignment • entire agreement • headings • severability • third-party beneficiaries • pronouns

  18. Independent Contractor vs. Employee • 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.

  19. Independent Contractor vs. Employee • Taxes without current payroll tax cut • Independent Contractor: Worker has to pay the matching payroll tax = 7.5% • Employee: Owner has to pay the matching payroll tax = 7.5%

  20. Independent Contractor vs. Employee • When in doubt… The Worker = Employee

  21. Types of Dental Practice Transitions • 100% Purchase of Practice • With or without prior associations with the practice • Partial Buy-In of Practice • With or Without prior associations with the Practice

  22. Documents for 100% Purchase of Dental Practice • Asset Purchase Agreement • Bill of Sale • Lease • Employment Agreement • Corporate Formation

  23. Documents for Partial Buy-In Purchase of Dental Practice • Asset Purchase Agreement • Bill of Sale • Operating Agreement • Lease • Employment Agreements • Loan Documents • Corporate Formation

  24. Some Important Dental Issues to be Addressed by an Attorney • Seller’s warranties • Assets being sold/Allocation • Prepaid Accounts/Fee Schedule • Accounts receivable • Lease • Indemnification • Adjustments • Closing contingencies

  25. Seller’s Warranties • 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

  26. Asset Being Sold/Allocation • Furniture, Fixture and Equipment • Good for Purchaser – Very bad for Seller • Supplies and Inventory • Good for Purchaser – Very bad for Seller • Goodwill • Bad for Purchaser – Very Good for Seller • Restrictive Covenant • Bad for Purchaser – Very bad for Seller

  27. 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.

  28. Accounts Receivable • Accounts receivable are the fees owed to the Seller for work completed before Closing • Seller usually keeps accounts receivable • Accounts receivable can be offset by prepaids • An average amount is 60 to 90 days of collection

  29. HUDSON CAREER COUNSELING

  30. How to Choose and Work with an Attorney

  31. Choosing an Attorney • 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.

  32. Attorney must . . . • be familiar with dental practice employment issues • be knowledgeable about dental issues • have excellent references

  33. Working with an Attorney • 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

  34. Working with an Attorney: • 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.”

  35. Working with an Attorney: Legal Costs Written agreement outlining fees: • initial retainer (refundable if unearned) • hourly: $300 - $425/hr • flat fee: $1,000 - $1,500

  36. Terminating the Attorney/Client Relationship • successful completion of transaction • unsuccessful transition • conflict with attorney

  37. 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.

  38. 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

  39. Get a Job! Gary Baumwoll, Esq. gbaumwoll@gmail.com www.LawyerForDentists.com

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