Simon Palmer, May 2005 - I recently overheard a conversation with a dentist at breaking point. Two years ago his practice was so busy he decided to take on an employee dentist “with view” and after several months of advertising and interviewing he found the perfect candidate. They shared a common sense of humour, practice philosophy and professionalism. Recently though the time came for the employee dentist to buy-in and they can’t agree on a price. The practice owner wants the price set close to the current value whereas the employee dentist takes credit for most of that high value and wants the price set closer to what it was when the employee started.
They both have valid arguments and in my opinion no matter how this resolves itself, neither will walk away from this situation happy. If the deal falls apart and the employee dentist leaves, the practice will no doubt lose patients as well. If the deal stays together one or both parties will have compromised on and feel cheated out of what they feel they are entitled to. When this happens usually the practice develops an undercurrent of mistrust and animosity between the principal dentists that acts like a time bomb.
The main reason relationships between dentists often fall apart like this is the relaxed attitude that both parties often take at the start. Too often dentists decide to join forces, either as employer/employee or as associates without initialising all the details of their long-term relationship. While this attitude might avert some tense, uncomfortable conversations in the short term, it is asking for trouble further down the track.
The fundamental point to remember about relationships between dentists working in the same practice is that above all it is a business arrangement between two business people. As such, concise, well-written agreements need to be in place to govern relationships in dentistry just as they are in every other commercial enterprise.
Somehow though, after spending time and much effort finding the perfect compatible candidate for themselves and the practice, many dentists don’t get around to having a lawyer draw up an agreement. At Prime, the common reasons that we hear for this over and over again include:
- Thriftiness: Finding the right candidate took an investment of money and time on advertising, interviewing and practice expansion costs. The dentists figure that they can save money by either not getting a legal agreement or getting one of the cheap off the shelf “insert-name-here” variety.
- Trust: The dentists feel like a legal contract would express a lack of trust toward the other dentist and other professional colleagues. They want to portray nothing but confidence in this new relationship.
- Suspicion: One of the dentists is suspicious of lawyers and legal agreements. They are scared that any agreement would protect the other dentist’s interests more than theirs and are more comfortable not having signed something committing them.
- Complexity: Getting their head around the legal clauses in an employment agreement raises the ‘ceiling of complexity’ in the dentist’s life beyond where he is comfortable.
- Optimism: The candidate is perfect on paper and in person. The dentists assume the relationship will be sunshine and happiness and that few if any points of contention will occur.
- Assumption that both dentists have the same understanding of the way things will work between them at the practice.
The Suspicion, Thriftiness and Complexity excuses uncover an overall image problem that the legal industry has surrounding it. Lawyers have gained a reputation among many as being overpriced pit bulls that one party unleashes to take advantage of another. While I am sure this reputation is well deserved in some cases I think we can agree that it is not necessarily the case. Dental legal agreements can and should be developed by a lawyer acting as dealmaker focusing on creating an agreement that works for both sides rather than ignoring the needs of the other side for the benefit of the party paying the bill.
The Optimism, Trust and Assumption excuses reveal that many people believe that legal agreements are only of value in poor relationships that need an agreement to keep people from each other’s throats.
Legal protection and recourse in the event that one party acts in bad faith is definitely a good reason to have a legal agreement written up. Disputes between dentists are all too common. Even if you selected your employee dentist with all care and due diligence you will never know how compatible you are till you have worked together for at least a few months. Even if you are compatible, the best of working arrangements will experience disagreements from time to time, and without the firm guiding hand of a pre-arranged comprehensive agreement in place, these disputes may boil over into an impossibly unhappy situation for both parties. No agreement can force a relationship to work, but a good agreement can make a bad situation tolerable.
However, if the only reason that you are writing up an agreement is to protect you from your employee or associate, you will probably be missing out on the main benefits that a structured, well-written legal agreement can bring to your practice. That is to remove any ambiguity from your working relationship and to create an exit plan.
Remove ambiguity
The primary purpose of creating a written agreement for your practice should be to force both parties to discuss and agree on all aspects of the working relationship in advance. It should purge ambiguity and expose clearly the obligation and the intent of arrangements of each party. Once ambiguity has been purged from a business relationship, serious problems will become much more rare.
Ironically, the test of a clear and well-developed agreement should be by how little you have to invoke it. A well-developed legal agreement isn’t something that gets taken out and pointed at with any regularity. The measure of a legal agreement should be by its pre-emption and the avoidance of conflict in the practice. That is, a well-developed legal agreement should make the two parties discuss and agree upon potential sources of contention long before they became sources of conflict. A well-developed legal agreement should sit in a drawer and not need to be taken out for pointing at.
Exit plan
The secondary reason for obtaining a written agreement that governs your practice relationships is to create an exit plan. One of the certainties in legal agreements between associates or employees-employers is that one-day the relationship will end. Either by choice, conflict, retirement, death or disability, every agreement has a limited life span and often dental agreements don’t reflect this certainty. It is important to consider this inevitability because a contentious break-up has ongoing implications that can cause financial and emotional distress to both partes.
An agreement between associates that is too easy to get out of is too fragile to survive. What dentist would want to invest time, money and effort entering an associateship if the other party could exit at any time, leaving him or her to bear the full expense of the facility? On the other hand an associateship that is too rigid is equally undesirable. I have come across agreements where the only way out is for the departing dentist to walk away with nothing, virtually abandoning his or her investment in the practice.
Exit planning isn’t easy. It calls for a delicate balancing act between one party’s ability to get out of an agreement that is no longer satisfactory and ensuring the stability necessary for a partnership to be functional. It may seem odd to devote time and energy to planning the end of a relationship when the people involved are so heavily focussed on getting it started in the first place. But when the time comes for the relationship to end –and it will- those clauses that provide for a clean and orderly break will be worth their weight in gold.
Conclusion
Too often we are all guilty of assuming the best and not preparing for the worst with our future. Its not hard to see that the optimistic and often naïve attitude many dentists take with their practice by not investing in comprehensive legal agreements place their future and that of the practice in uncertain waters. Further down the track when an undiscussed contingency occurs all parties may agree upon how to handle it. But what about the fifth time that happens or the twentieth? The odds start stacking up against you.
Surely the best way to make sure that points of contention don’t tear a dental practice apart isn’t to just find a promising candidate and hope for the best. You can save yourself the risk and future stress by spending time putting together an agreement in advance to govern your relationship that forces you to discuss and address as many contingencies as possible well in advance.
[Published in Australasian Dental Practice, May/June 2005]