Thinking of engaging an Associate in your dental practice? Read this first!
The relationship between principal and associate is essentially a licence granted by the principal to the associate for use of the principal’s facilities (staff, patients, equipment, materials and surgery space) in return for a fee.
Although this arrangement is commonplace in the dental world, we have found that a significant number of principals / associates do not have a written agreement to govern the relationship which can lead to a number of problems. Five of the main issues we have come across are as follows:
1. Self-employed status:
Associate arrangements are unique to the dental profession and provisions such as payment for holiday, sickness and maternity call into question whether they truly are engaged on a self-employed basis.
At present, where the standard from associate agreement approved by the BDA is used (and the terms followed) the associate income is recognised by HM Revenue & Customs as being assessable under trading income rules and not as employment income (but this does not mean that this will not be challenged in the future).
If an associate is deemed to be an employee the principal could have to pay national insurance contributions retrospectively for the period of the associate’s engagement and the associate could be entitled to claim employment rights such as the right to bring an unfair dismissal claim.
2. Security of tenure:
If the associate agreement can be interpreted as creating a lease rather than a licence of the practice premises then the principal risks the associate establishing a statutory right to remain in occupation.
3. NHS contracts:
Typically associates provide NHS services as a performer under the principal’s NHS contract (with the principal being the contractor) however, we have seen circumstances whereby the associate has been included as a contractor or, even holds their own NHS contract. This can make matters difficult when principals come to sell the practice as it can raise questions about ownership of the NHS goodwill or the associate could refuse to sell.
Goodwill is essentially the value of the reputation of a business and the tendency of its customers to use it again / recommend it. Goodwill represents a significant amount of the value of a practice however it is intrinsically linked to patients and therefore vulnerable to being affected by associates who will inevitably form their own relationship with those patients.
Associate agreements should therefore have terms to protect the principal’s goodwill including:
- A statement that the goodwill of the practice belongs to the principal;
- Anti-competitive restrictions, for example how close to the practice an outgoing associate can work, prevention of solicitation of patients / staff and restrictions on tendering for a NHS contract; and
- Arrangements for completion of treatments on departure / remedial work for defective treatments carried out by the associate.
Associate agreements should also contain terms which help principals ensure compliance with regulatory requirements for example, obliging the associate to comply with practice policies to safeguard against breaches of CQC and NHS requirements and provisions requiring them to maintain their own professional indemnity insurance.