What happens when the Associate-Principal Relationship terminates at a Dental Practice?
We often get asked by Associates and Principal dentists (the “Principal”) what happens when they inevitably want to move on from working as an Associate to move to another dental practice or buy their own dental practice. The questions we get include what happens to the patients that I have been treating? Do I have
any obligations to the old practice/Principal? What happens to any moneys that are owing to me? Can I compete against my old practice? This blog post will try to tackle these issues and hopefully ease the transition.
Termination of Associate Relationship
In your Associate agreement you will most likely have termination provisions. The Associate agreement will set out how much notice the Associate is required to give to the Principal before termination. Likewise it will set out how much notice the Principal is required to give prior to terminating. Under most Associate agreements the Principal and Associate can terminate the relationship without cause within the notice period set out in the agreement. There will also be provisions setting out what would constitute termination with cause in which case the Principal will not be required to provide the Associate with notice. As we noted in a previous blog post non-competition covenants between a Principal and Associate (unless the Associate sold his/her practice to the Principal) are not normally enforced by our courts leaving the Associate the ability to move close by. However, strong non-solicitation covenants in the Associate Agreement will be enforced – we normally suggest that the agreement contains a damages clause where a patient follows the Associate.
No Associate Agreement
If you do not have an Associate agreement the relationship could be terminated immediately by either party. You should consult with a dental lawyer if you think you are an employee.
Care of Patients following termination, Competition and Solicitation
The termination of the Principal-Associate relationship must not be allowed to impact the ongoing treatment of patients or adversely affect their right to receive care from a dentist of their choice. We would suggest that you consider putting in transition terms in your Associate agreement which deal with treatments in progress, handling any changes to a treatment plan or how re-treatments will be addressed. An option of handling work in progress is to agree with the Principal to accommodate you at the practice to complete the work in progress (if no other dental Associate is able to) or alternatively have the patient come to the new practice of the Associate.
It would also be prudent to negotiate rights of access to original patient records to help with the completion of certain work (this may be difficult to accomplish as the Principal may not want you to have access without the patient specifically requesting it). If you don’t, you would have to seek the release of the chart from the patient. If the Associate agreement forbids communication with patients after termination it will be the Principal’s responsibility to ensure the ongoing care of the patient. The Principal is, however, required to provide the Associate’s new practice location if it’s requested by the patient. If there is no Associate Agreement indicating otherwise the Dentistry Act (Ontario) allows an announcement to the patients including the location of the Associate’s new practice.
No Associate Agreement
As noted above if there is no Associate Agreement indicating otherwise the Dentistry Act (Ontario) allows an announcement to the patients including the location of the Associate’s new practice.
We have had situations where there was no associate agreement and the Associate moved to a location close to the Principal’s office and attracted a large number of the patients of his/her former Principal’s practice to the Associate’s new practice. This has occurred recently where the Principal was an investor dentist and did not visit the Practice regularly and therefore the patients dealt mainly with the Associate. The Associate is entitled to send an announcement card to the patients (unless stated otherwise in an Associate Agreement). The answer of course is for the Principal to insist on an associate agreement and have a strong non-solicitation covenant in the Associate Agreement with provision that the Associate pay damages ($500.00 to $1,000.00 for e.g.) to the Principal for each patient of the former Practice that moves to the Associate’s new practice. It is of utmost importance to have a well written Associate Agreement especially in the case of an investor dentist.
What happens to moneys that are owing to me by the Principal?
Your Associate Agreement will spell out what occurs upon termination of the Associate-Principal relationship. Generally, the Associate will be paid up to the date of termination and the Principal will agree to use reasonable efforts to collect any outstanding receivables and pay the Associate his/her share. There may be a holdback for any corrective work that needs to be done. If you don’t have an Associate Agreement in place it may be more difficult to recover your share of the accounts receivable.
Whether you are an Associate or a Principal and thinking about terminating the relationship you should ensure that you contact a dental lawyer to discuss the situation and review your Associate Agreement. It is of utmost importance to have a well written Associate Agreement to protect both the Associate and the Principal. This blog post is for informational purposes only and should not be construed as legal advice if you have any questions please do not hesitate to contact us.