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3 perils of associate veterinarian contracts
These three stumbling blocks must be fully understood before veterinary practice owner and associate sign on
I always enjoy those commercials and TV shows where all the family members of the recently deceased millionaire are gathered around the attorney's desk for the "reading of the will." There's usually a former spouse as well as a gold-digging recent spouse who is about one-third the dead guy's age. The director sometimes throws in a deadbeat kid or two just to add to the climate of shock and horror when the lawyer announces that the entire estate is being left to the decedent's 20-something bride.
Although I deal much more extensively with contracts than with wills, I do get my share of shocked and horrified clients who discover that they won't get what they expected under the terms of a document they have presented to us for review. A common case is the associate whose contract doesn't provide for an anticipated increase in salary or a buy-in or partnership opportunity that was brought up at the time of hiring. And what do you do when those oral discussions aren't reflected in the employment documents?
Veterinarians seem to experience these rude awakenings fairly regularly because so many share an inexplicable penchant for signing papers they don't fully understand. Veterinarians also love to sign papers that appear to be brief and clear but leave out essential language protecting their interests. They wait until there's a problem they believed was covered by a document they signed years earlier, only to discover that the matter was mentioned superficially, covered incompletely or not addressed at all.
Sadly for me, it's often my job to reveal this disappointing news.
Most commonly, the worried party is an associate who is beginning to sour on his developing relationship with his employer. There are three common problems I see when he or she asks me to interpret employment-related paperwork, a corporate document or other binding legal agreement:
1. Partnership offer
It's perfectly normal for an employer to discuss the possibility of eventual partnership or a buy-in with a newly employed veterinarian. From time to time, the two parties will agree that the topic should be raised in the employment document specifically. Then the situation usually unfolds this way:
After a year or two—or five—the associate gets tired of the boss not "getting around" to discussing the prospect of an equity position in the practice. Hesitant to seem pushy, the associate looks to get a legal opinion on the employment agreement that controls the employment relationship since its inception.
Upon close inspection, I sometimes find that the contract does indeed mention the possibility of a buy-in for the associate. Yet it speaks of the possibility as nothing more than that—a possibility.
In the absence of a commitment and/or a time frame for the practice owner to make a buy-in offer to the associate, nothing legally has to happen. The practice is entitled to ignore the topic ad infinitum as long as the associate isn't willing to put his or her foot down and insist. Associates are often afraid to do this for fear that future pay increases may be adversely affected and that the partnership offer still will not be tendered.
What makes associates think they're entitled to these offers? Oftentimes, language in the employment agreement is confusing or intentionally misleading. The contract might say, "The employer will consider the associate for partnership within a reasonable period of time." Or, "A 20 percent partnership shall be offered to the associate during the period of employment at the discretion of the employer."
The agreement might as well say that the associate can have the whole practice for a nickel as soon as the owner decides to give it to him. With no time limitation or language binding the employer, this sort of clause is worthless—except possibly for purposes of leading associates into thinking they have some type of exercisable right to a buy-in offer.
2. Guaranteed compensation.
Particularly in the current economic environment, it's becoming increasingly common for financial aspects of an employment contract to change. Practice owners and associates operate on the theory that when employment starts, there will be a base salary. In later years, however, compensation will be determined as a percentage of gross revenue.
The problems arise when practice revenue drops in a difficult economy and neither the practice nor its owner is making the kind of money historically seen on the annual balance sheet. The boss is happy knowing that after the associate's incentive-based compensation formula kicks in, the employed doc won't cost more than he or she is worth—that associate will only be paid a percentage of his generated revenue.
On the other hand, the associate is happy assuming that the incentive compensation language in the employment document is only a contingency for his benefit. Surely, if the caseload doesn't support enough revenue to allow the incentive amount to exceed his initially agreed-to base salary, the base will be there to protect him.
Well, they can't both be happy, can they? Production-based compensation is either obligatory or optional. Associates are often extremely disappointed to learn that if office appointments aren't being scheduled, their salary will take a corresponding hit. And when that first smaller paystub emerges from its envelope, that's when I get the call to interpret compensation language in the employment contract that wasn't fully grasped by the parties (or at least one of them) at the beginning of the work relationship.
3. Professional commitment
I see this problem in veterinary employment contracts when the associate is relatively experienced or has his or her board certification in a specialty.
For one of many possible reasons—inadequate compensation, poor advancement potential, etc.—a well-credentialed veterinarian will leave one hospital to take another position where she sees the potential of "getting in on the ground floor" of a specialty or a good opportunity to develop her unique skills in a specific area.
Sometimes this will mean signing on to a multidoctor specialty practice where there's a chance to be promoted to medical director. Or it might be a chance for a position with a large veterinary group as the start-up doctor at a newly opened branch or satellite clinic.
In these cases, the veterinarian involved expects that advancement is likely. As part of that, he or she might be promised the necessary building blocks to allow that advancement to occur, such as increased marketing to develop the caseload. Oral assurances might be made as to the future hiring of other doctors to free up managerial time for the experienced new hire.
It might be as simple as the implied assurance of a sufficient caseload to allow the experienced associate to make a name for himself or herself at the practice and in the community.
The problem occurs when all these spoken and e-mailed intentions are never committed to writing. The hiring practice very well might know that new doctors will spin their wheels without costly marketing efforts at a new satellite or will be hamstrung with routine dog and cat appointments in the main office with no time or caseload to permit the development of their interests in exotic medicine and surgery.
Finally, when the contract is interpreted as to its legal enforceability, all the usual suspects are there: a salary cap, a broad non-compete clause and frequently a long-notice requirement if the associate wants to leave. What might well be missing is the key language mandating that the associate receive what he or she came to the practice for in the first place: commitments to practice expansion, financial obligations by the practice owners and new staff to permit the associate's pursuit of his or her special interest.
Veterinarians, you can avoid a lot of these problems with better understanding of your employment contracts. Get it in writing, know what you're signing, and make sure you're happy with your legal responsibilities and the responsibilities of your new employer under the terms of the contract.
Dr. Allen is president of the Associates in Veterinary Law P.C., which provides legal and consulting services to veterinarians. Call (607) 754-1510 or visit firstname.lastname@example.org.