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10 ingredients for a well-drafted associate agreement

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  Posted by: The Probe      15th March 2020

The days of forming an associate agreement with a firm handshake or simply on a ‘split of income’ basis should be a thing of the past. It is important that a practice principal and an associate dentist formalise their professional relationship with a bespoke, written agreement that clearly sets out the terms under which they shall operate. A well-drafted associate agreement is made up of many important ingredients, 10 of which are outlined below.

 

  1. Parties

It is important to remember that associate agreements are contracts that are personal to the parties, with the usual third-party right exclusion. If the wrong legal entity is on the contract, then a third entity (such as a limited company following incorporation) may not have the benefit of that contract.

 

  1. Retention for failed treatment

Do you have the contractual right to retain part of the monies that are due to the associate during a notice to terminate period or from their final pay set at a level relevant to the treatment they perform? Are there a clear set of clauses dealing with who determines what is “failed treatment”? These are all items that should be clearly set out and agreed upon in any agreement.

 

  1. Restrictive covenants

A restrictive covenant is the single most effective means by which you can protect your business against departing associates seeking to take patients or set up a practice nearby. When drafting a restrictive covenant (known as post-termination restrictions), you need to outline what it is, who it applies to and for how long. It is vital to make sure your restrictions are relevant and reasonable in protecting your legitimate business interests, or else it could be held as unenforceable by a court as an unlawfulrestraint of trade.

 

  1. Entire agreement clauses

By inserting an entire agreement clause in the contract, you can prevent associates from claiming there are other terms sitting outside of the document that were agreed prior to the agreement being signed (and which one party or the other may seek to claim they relied upon). For example, “He promised X at Y meeting or in Z email”.

 

  1. Variation clauses

It is common that one party or the other will need to change the terms of the agreement during its operation. There should be a clause that can be exercised in changing those terms and an agreed procedure for those to be agreed, and whether such changes have to be in writing or not.

 

  1. Payment provisions

One of the most common areas of dispute is how the individual is paid and for what. There are often disagreements over percentages of deductions for laboratory bills and other costs associated with a course of treatment. A comprehensive written agreement can extinguish or at least minimise the risk of claims being brought and disputes arising.

 

  1. Termination clauses

How much notice is either party required to give at the end of the agreement?
Is there any right for either party to terminate with immediate effect? In what situations do you need this right? These are all questions that a written agreement must answer, as well as the form the notice must take and to whom it should be given.

 

  1. Compliance clause (including indemnity insurance)

It is important to consider requirements under the agreement in relation to GDC registration, CQC compliance, ICO data protection compliance and DBS checks. These are requirements both from a professional and regulatory perspective and a contractual obligation from the associate dentist to ensure these are covered off is advisable

 

  1. Recitals and preamble

Make sure to outline the intention of the parties. This is the starting point for a court in terms of looking at whether an individual is self-employed, a worker or an employee.

 

  1. Tax indemnities

With changes to IR35 legislation around the corner, or in the event of a claim
of employment status (from a legal or tax perspective), are you covered with tax indemnities You should ensure that your agreements not only require the associates to discharge of all tax and national insurance liabilities under the contract, but also that you are protected in the event HMRC turn to your business for such payments of tax.  

 

A well-drafted associate agreement provides clarity and certainty on the terms and conditions, providing a legal point of reference should any disputes arise in the future, and also serving as a starting point for determining the intended employment status of an individual contractor. Not having this written contract in place means your business is not protected from your goodwill being damaged, and also paves the way for disputes, misunderstandings and, therefore, costs to the business.

Before drafting your agreement, it is worthwhile seeking legal support from a trusted firm who is familiar with the dental profession. Goodman Grant can help you create bespoke associate agreements that reflect the true relationship between parties.

 

Ben Williams of Goodman Grant Solicitors – contact on bw@goodmangrant.co.uk

 

For more information visit www.goodmangrant.co.uk or contact your nearest office:

London: 0203 114 2133

Leeds: 0113 834 3705

Liverpool: 0151 707 0090


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