Is your veterinary associate contract any good?

October 5, 2019
Jeff Rothstein, DVM, MBA

Dr. Jeff Rothstein is co-president and founder of Midwest Veterinary Partners, which operates more than 30 practices in the Midwestern states with headquarters in Novi, Michigan.

Both associates and practice owners should love clear, mutually beneficial employment contracts. They give associates clarity and peace of mind and ensure future buyers of a veterinary hospital can hold onto what makes that clinic greatthe staff.

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In my 25 years of veterinary practice, I've offered and reviewed many employment agreements. Discussion of contracts begins in veterinary school when students should be told the importance of having a contract in place when entering the workforce as a new associate. These contracts matter a lot, as they often serve as a differentiator as a new graduate selects one employer over another.

Forgoing a written veterinary associate contract, while possible, is ill-advised. That leaves both practice owner and associate vulnerable to each other's whim and offers little security. If you're afraid to commit to a contract, it's probably not the right fit for either party. Contracts are mutually beneficial for a lot of reasons. Let's look at them.

Why associates should like a good contract

Pay terms. It's not in the interest of any veterinarian for compensation to be open to interpretation-especially in an environment today where many practice owners are interested in selling their practices. Associates, why would you want the new practice owner to come and adjust or lower your compensation?

Hours worked. Contracts spell out terms of employment. Associates want to know, for instance, roughly how many days a week or hours a week they're expected to work. They want to know if they'll be taking emergency calls and how often. A good contract leaves nothing to surprise, and both parties should be happy with-and prepared to honor-the terms of the agreement.

A settled agreement. Ultimately, the contract serves as a written and agreed-upon tool to be referred to in case one party or the other thinks the terms aren't being met.

Why practice owners like a good contract

Solid contracts in place protect a business and make it more valuable to potential buyers (stability and legal contracts are a big plus). Even if the practice owner doesn't intend to sell the practice anytime soon, who wouldn't want their business to be more valuable? But not all contracts are created equal. The important provisions are:

Perpetual vs. annual?

My experience suggests that perpetual contracts are more favorable for both sides, even if you mandate some form of annual review. If the agreement is annual, the associate may leave at the end of the term and may not have an obligation to give notice of departure. In a short-term contract, it's also essential to examine the noncompete language: Is it in force for a reasonable time frame and distance from the clinic?

Noncompetes. Without a noncompete clause, there's no real value to the contract from a potential practice buyer's perspective. Most purchasers of multidoctor practices are genuinely interested in keeping the current medical team in place. Loss of doctors usually correlates with declining revenue and profits, which means a bad investment. A key aspect of the noncompete is a reasonable and enforceable distance (for example, 10 miles is more reasonable than 35 miles). While noncompetes aren't always popular, it's not unreasonable to ask a doctor you helped, trained, mentored and invested in not to open a clinic around the corner.

Nonsolicitations. Most people forget about this one, but it can be even more important than a noncompete. The last thing a practice buyer wants is for a key team member to leave the practice and start recruiting the best team members away to another hospital.

Get an attorney

Hey, practice owners, get legal assistance with your associate contracts. Things change. A contract should spell out, for example, how associates will fill in for a doctor out on maternity leave or who covers Saturday hours if they're extended during the busy summer. The right attorney can help you think through all these scenarios.

Consistency. All part- and full-time doctors should sign contracts with the same terms.

Notice. Associates should give 60 to 90 days' notice before leaving for another job.

Assignability. The employment contract should state that it's assumable by a buyer. This saves everyone weeks of negotiation with existing staff if the practice owner does decide to sell. It also protects the associate from the new buyer suddenly switching up terms (i.e. compensation) on them.

Who comes out ahead?

Associates should understand that every contract is a tradeoff-in exchange for working X number of hours for Y pay, you're being asked to “do no harm” to the business. As long as the terms are standard and customary for the profession, this isn't unreasonable. Associates unclear on the fairness of a contract should seek an attorney's review on their behalf.

Handshake agreements routinely fall apart. Everyone is better off with a contract. They give everyone clarity and peace of mind that things will stay the same. And that's a good thing for associates, the practice owner and any future practice buyers down the road.

Dr. Jeff Rothstein is co-president and founder of Midwest Veterinary Partners, which operates more than 30 practices in the Midwestern states with headquarters in Novi, Michigan.