Intro: On Air With OMSNIC is a podcast intended to provide information only on certain risk management topics, and is not to be construed as providing legal, medical, or professional advice of any form whatsoever. Because federal, state and local laws vary by location, nothing in this podcast is intended to serve as legal advice or to establish any standard of care. Legal advice, if desired, should be sought from competent counsel in your state. The views or opinions expressed by the guest do not necessarily represent the views or opinions of OMSNIC or its subsidiaries.

Bill Klaproth (Host): This is On Air with OMSNIC, a podcast brought to you by OMSNIC, the leading medical professional liability insurance company owned by OMS, that exclusively insures OMS. I'm your host, Bill Klaproth. Today, Richard Small joins me to talk about employment agreements an important topic for OMS entering practice or those considering a change in their current employment situation. Richard, thank you so much for joining me today. I really appreciate your time and expertise as both a defense attorney and insurance agent with over 30 years supporting OMS in practice. So let's jump right into this.

In your experience, Richard, what do you think is most challenging to OMS entering practice today?

Richard Small, JD: Thanks, Bill. The most challenging question I used to be asked was, what does the contract I just signed mean? The biggest problem with that question, is that OMS has already signed the agreement, so whatever it means, it can't be changed easily. The point is to have any agreement reviewed before you sign it.

The most common challenges to today's oral surgeon transitioning to practice involves what they need to do, who they should rely on for professional guidance and identification of key issues in the agreement to consider. Some oral surgeons want to better understand special issues and risks associated with newer practice model types because they hear a lot of rumors about how they function. These models are still evolving. Instead of focusing on any particular kind of practice, we will review risks you might want to consider in any agreement.

Host: Absolutely and thank you for that, Richard. So there sure is a lot to consider during this transition, but the good news is new graduates are not expected to have all the answers and there are resources to help. So who do you recommend OMS consult with for guidance through this transition and throughout their careers?

Richard Small, JD: Well, I recommend that new oral surgeons select a team of professionals to help them start a practice, including a lawyer, a CPA, and an insurance agent familiar with OMS practices. This team will protect the legal, financial, and insurance interests of the OMS. In addition to individual consultants, oral surgeons will benefit from joining their national and state professional associations such as AAOMS, their state component society, and their Dental Association.

These groups track developments whether legal, regulatory, or practice related and provide considerable value.

Host: Richard, now let's turn our focus to employment agreements. Would you introduce some of the most important aspects of these agreements?

Richard Small, JD: Yes. It's important to understand that an employment agreement is a contract. It defines the relationship creating rights, duties, benefits, as well as conditions that trigger the termination of the agreement, any restrictions associated with the agreement and what each party is expected to do, and when. It is critical that oral surgeons understand what the agreement means, what is expected of them and what they expect of their employer. If their agreement requires them to spend a certain amount of time entertaining and meeting with referring dentists, covering call or otherwise, and if they fail to do so, it could jeopardize their bonus or even their job. The point is, know what is expected before signing the agreement and starting a practice.

Host: And then are OMS typically hired as an employee or can they also be hired as an independent contractor?

Richard Small, JD: Okay, this is a tricky topic. Whether an OMS is an employee or independent contractor involves state law, which can supersede what they're called in their agreement. Generally, the difference involves the degree of control OMSs have over what they will be doing. Independent contractors usually act as self-employed professionals working for another person's practice, typically receive a 1099 and pay their own prepaid taxes and governmental fees. The more control oral surgeons can exercise, the more likely they will be considered an independent contractor. For an example, can they participate in setting their hours, when they work, whether they can work for others, the degree of control they have over how offices operate, how claims are submitted, who hires, fires and disciplines staff. If an OMS is defined as an independent contractor, their lawyer and or their CPA should review the employment agreement to be sure their defined status is consistent with state law.

Host: So Richard, knowing there are risks related to any employment position, are there any specific risks related to being an independent contractor?

Richard Small, JD: Well, if an OMS is an independent contractor, we often see an indemnification defense and hold harmless clause in the agreement. This clause means the owner or corporation may ask the OMS to cover any defense costs and liability associated with care and quote hold the practice harmless, end of quote.

For example, if an OMS is sued for a patient injury involving an instrument dropped in the patient's mouth, and an indemnification clause exists, the OMS and the OMS's malpractice insurance carrier might be solely responsible for defending and possibly paying the claim, but it's not always that simple. If an employee assistant of the practice actually dropped the instrument in the patient's mouth, it could be argued that while the assistant was under the supervision of the OMS, the assistant was also an employee of the practice. So the indemnification clause may not be enforceable. OMSs who agree to indemnify someone else, should be sure they have adequate insurance.

If oral surgeons are unable to ensure this risk according to their insurance agent, I recommend that they ask their attorney about contractual options for reducing the risk. This can get complicated and all state laws are not the same.

Host: Well, this is, uh, very interesting what you're talking about, so thank you for sharing all of this useful information. So, Richard, many employers require OMS professionals to participate with certain payers or insurance companies. Are these terms outlined in an employment agreement as well?

Richard Small, JD: Most employment agreements require oral surgeons to participate with certain payers important to the practice, geographic region, or for other reasons. Some employment agreements do not specify all payers with whom they are required to participate because this can change over time. Some agreements simply require oral surgeons to par with all payers with which the practice pars.

It's important for OMSs to understand their obligations, including how and when they must terminate their participation with payers or insurance companies. This becomes important when OMSs has moved to another employment position. I've had clients who left jobs and started new ones, but did not cancel their participation agreements. Patients sometimes schedule appointments with the OMS at the new practice believing their insurance will be accepted. If the practice does not participate, the OMS can inadvertently force the new employer to par based on terms the employer did not accept.

Host: And then are there common employment agreement details that may or may not be negotiable?

Richard Small, JD: Well, in theory, all terms are negotiable, but in healthcare employment agreements, some issues are more negotiable than others. Restrictive covenants and indemnification clauses can be challenging to negotiate. These clauses protect the employer and practice owner. The employer's willingness to modify key terms often depends on how eager they are to fill the position.

This sometimes comes down to whether the employer needs you more than you need that particular job. Employment contracts are usually preceded by discussions about key terms like salary, bonuses, benefits, hours, covering call, third party plans, vacations, and a stipend for CE and maintaining professional credentials and memberships and malpractice coverage.

Bill Klaproth (Host): So can OMS also negotiate who pays for malpractice insurance?

Employment agreements may require OMSs to purchase malpractice insurance from certain companies with a certain policy format. I know some of your podcasts will dive into the details of coverage for OMSs, but for now, it's important that oral surgeons know they might be able to negotiate who their carrier is and their policy limits and who pays the premium and whether a tail policy is required upon leaving a practice. Experienced lawyers can negotiate reasonable terms.

Richard Small, JD: Adequate policy limits from a reliable company that understands OMS practices is of critical importance. An oral surgeon's personal assets can be at risk if the insurance company fails to use experienced attorneys and experts to successfully defend them, or if they do not have adequate policy limits. This is why about 85% of practicing OMSs are insured by OMSNIC. OMSNIC is a professional liability insurance company that OMSs can rely on from the day they start until they retire. OMSNIC coverage also includes stock ownership and the employment agreement should outline who will pay for the stock buy-in.

There's an 85% chance that the prospective employer will be covered by OMSNIC, but if not, investigate your options and negotiate those terms.

Host: And Richard, you mentioned restrictive covenants earlier. Can you explain what this is and how it might limit what an OMS can do following termination?

Richard Small, JD: Yes. Many states allow employers to protect proprietary interests by limiting what a prior employee can do upon leaving. The primary tool used by employers to protect their practices involves restrictive covenants. For example, most restrictive covenants set a geographic region, and a timeframe during which the prior employee cannot compete. Most state laws allowing restrictive covenants require the restrictions to be both reasonable and related to an actual proprietary interest of the employer. Be aware of one recent development. The FTC is considering making restrictive covenants in employment agreements unenforceable. You'll be hearing about this if it happens.

As of the date of this podcast being recorded, the FTC hasn't ruled yet, but this is a heads up because sometime this year we expect them to make this decision. So, whether a restriction is reasonable, sometimes depends on the area of practice. In a densely populated city, a 50 mile radius restriction could mean an OMS has to leave an area where their family made it a home, as well as friendly referrals and other things they do not wish to give up.

Courts might consider this restriction unreasonable and too broad. Most geographic restrictions are less than 50 miles. However, in a rural area, a 50 mile radius may not have the same implications due to fewer practices in the area. Another example I'm familiar with involved an OMS who was considering employment by a practice with five locations spread out over a large area. However, he would only be working at two locations. The restrictive covenant initially restricted him from working within a 20 mile radius from each of the five locations. This resulted in an unreasonably, large restricted area and applied to areas where he did not work. However, we were able to negotiate and limit the restrictions only to the two practices where he was actually working.

Host: And are there other things that can be restricted in an agreement?

Richard Small, JD: Well, in addition to restricting where an OMS works and for how long, OMSs can be restricted from taking employed staff with them, contacting referrals of the practice, advertising in certain areas, soliciting patients of the practice or patients within a defined area. One last point, litigating a restrictive covenant is expensive. Employers usually have the upper hand, since most have more resources than an OMS who's only been out a year or so, but has several hundred thousand dollars of loans to repay. So keep this in mind when reviewing restrictions and hire attorney for advice.

Host: Absolutely. And then can you speak to considerations related to when these employment agreements end?

Richard Small, JD: Well, most employment agreements should have some type of termination clause. Most contracts run for a year or two. Some automatically renew, while others require the employed OMS to satisfy certain criteria for the agreement to continue or turn into some form of equity partnership. Usually either the employer or employee can terminate the agreement.

The reasons why the employer can terminate the agreement are usually defined in the contract itself. Oral surgeons can get into trouble when they fail to understand penalties relating to termination. For example, some agreements have penalties if an OMS does not provide sufficient notice the OMS is leaving.

I know of one OMS who was contractually obligated to pay $38,000 to terminate her agreement. This happened because the agreement had a 90 day written notice clause with a $500 a day penalty for each day short of the 90 day notice. Because the OMS was eager to start her new job, she only provided 14 days notice resulting in this significant penalty. So if you multiply the 76 days times $500, that's $38,000 in penalty. A related issue involves what happens if things don't work out in a relatively short period of time, let's say 60 days. One possible solution involves negotiating a preliminary period, so the restrictions are not activated if the OMS leaves before 60 days. This short employment period poses no significant threat to the practice. But regardless, employers will not agree to delaying restrictions in some cases.

Host: Well that makes sense, Richard, this has been wonderful. Any closing thoughts related to employment agreements?

Richard Small, JD: Yes, Bill a few thoughts. First don't sign any employment agreement or third party participation agreement without first reading it, getting legal advice and understanding obligations while practicing and when leaving a practice. Some additional things to consider: Number one, create and rely on a professional team, including a lawyer, a CPA, and an insurance agent before signing the agreement and starting a practice. Number two, take restrictive covenants seriously. The ramifications of leaving a practice are often the last thing an OMS will consider when starting one, but it's very important to do so along with getting legal advice and keep your ears open for the FTC ruling that we expect this year about whether they're even enforceable.

Number three, in theory, all terms of a contract are negotiable, but in the real world, some employers are not willing to do so. This could force an OMS to make important decisions that come with some risks. The point is to understand those risks or attempt to negotiate the terms of the contract before deciding whether to accept a job.

And lastly, all agreements come with some risks. Oral surgeons won't always get what they want either, but there are always bumps in the road. But knowing where those bumps are can limit potential problems.

Host: Well, Richard, thank you so much. You are explaining the bumps in the road to us, and we really appreciate your expertise on this. 

Much of the information that we shared in today's episode can also be found in the Transition to Practice Guide available at OMSNIC.com. Isn't that right, Richard?

Richard Small, JD: That's right Bill. I hope that this podcast and the guide can be useful resources for OMSs. Thanks for having me today, Bill. I appreciate it.

Host: And once again, that's Richard Small. And for more information, you can always go to OMSNIC.com. And if you've found this podcast helpful, please share it on your social channels and check out the full podcast library for topics of interest to you. This is On Air With OMSNIC. Thanks for listening.

Outro: Not familiar with OMSNIC yet. OMSNIC offers unmatched protection and defense exclusively for OMS. Visit our website, OMSNIC.com to learn more. Policy holders have access to exclusive, complimentary risk management resources, such as informed consent forms, videos, and on-demand CE courses.