One of the most important types of legal matters that dental practice owners will need to handle includes drafting offer letters to associates brought in or hired to the practice. An offer letter represents a preliminary offer for an associate to join a dental practice. Although an offer letter will address the major terms of an associate’s employment, the letter usually expressly states that the parties will negotiate and sign a final, binding agreement.
When an owner has less experience with the legal aspects of running a practice, they may not know what key topics an offer letter should include. At a minimum, an offer letter should address an associate’s compensation, benefits, expected working conditions, and a list of the other major clauses that the final contract will include.
Compensation Structure
Dental practices may compensate associates in various ways. Some businesses may pay associates a base salary. Other practices may offer associates a production- or collection-based pay structure in addition to, or instead of, a base salary. Production-based pay compensates associates for the total value of work billed to patients and insurance companies. Collection-based pay compensates associates based on the revenue collected on invoices and insurance claims. Practices may offer new associates a base salary that eventually transitions to production- or compensation-based pay as they build their patient lists.
Offer letters should use clear, concise language to discuss compensation structures. Otherwise, ambiguities could lead to conflicts when the practice and associate later negotiate a finalized agreement.
Work Schedule, Location, and Patient Load
Offer letters can also include bullet points that describe the key conditions of an associate’s work for the practice, including:
- Days and times available for appointments
- The office(s) where the associate will work (if a practice has multiple locations)
- Chair assignments
- Expectations regarding patient volumes
Laying out these details in an offer letter helps an associate set their expectations for working for the practice and avoids misunderstandings or surprises down the road.
Employment Benefits and Perks
Depending on the type of relationship between the practice and associate, an offer letter may also cover the employment benefits and perks that the practice may extend, such as:
- Health/dental/vision insurance
- Disability insurance
- Malpractice insurance
- Paid time off
- Technology stipends
- Travel stipends for paid parking or tolls
- Financial contributions toward continuing education expenses
Identifying Key Terms in the Final Contract
Finally, an offer letter should also note the other major terms that the final contract may include so that the associate can prepare to negotiate those issues. The letter can acknowledge that the final agreement will address matters such as:
- Restrictive covenants (e.g., non-compete or non-solicitation provisions)
- Termination for cause requirement
- Termination notice procedures
- Amendment requirements
Identifying these terms can avoid a situation where an associate may walk away from negotiations when a proposed final agreement includes restrictive covenants or other terms.
Common Mistakes That Dental Practice Owners Make with Offer Letters
Common mistakes that practice owners may make when writing offer letters for associates include:
- Treating the offer letter as a legally binding agreement, especially when the letter expressly contemplates the execution of a finalized agreement
- Including binding language in the offer letter when the parties intend to create a finalized agreement (especially if the final agreement does not have an integration clause)
- Not mentioning in the offer letter that the final agreement will contain restrictive covenants when the practice intends to include one
- Having inconsistent terms between an offer letter and final agreement, which can lead an associate to feel that a practice has tried a bait-and-switch or create confusion regarding the definitive terms of the parties’ agreement
Contact Our Firm Today for Experienced Guidance
Having legal counsel can help you create a comprehensive, effective offer letter that facilitates negotiations toward a final agreement. Contact Mahan Dental Law today for an initial consultation with a knowledgeable dental attorney to learn more about the essential terms of associate offer letters and to get help negotiating and drafting a letter with a prospective associate.
