Buying or selling: cover your bases regarding potential staff issues

May 1, 2007
When selling a dental practice, the seller is not only approaching the end of his or her professional relationships with the patient base, but ending a relationship as the “employer” of a staff.

by Max Wilson, DDS

When selling a dental practice, the seller is not only approaching the end of his or her professional relationships with the patient base, but ending a relationship as the “employer” of a staff. These events can be emotional and stressful, but the seller must remain focused on the business at hand when there are employees in the mix. After the practice changes ownership, the buyer will replace the seller as the employer. During this transition period, the practice employees must be handled in a manner that protects both buyer and seller from potential violations of the federal employment laws.

Many dentists are not aware that federal employment laws extend to dental offices with only a few employees, just as the same laws apply to large companies with hundreds of employees. Workers enjoy the same protection under the law. As dentists, we need to do everything possible to remain in compliance as business owners.

Could these laws affect you as a doctor wishing to sell his or her practice? It may be an item that deserves consideration. Let’s look at an example of how these laws may affect the transition of employees. Assume Dr. Seller has a practice with several employees who have worked for him for various periods of time. Those employees have a desire to keep their positions within the dental office and continue their employment with Dr. Buyer after the sale.

Dr. Buyer becomes the new employer following the sale, and wants to continue employment arrangements with the current office staff. After Dr. Seller has departed, Dr. Buyer inadvertently commits a violation of the labor laws by failing to pay overtime wages due a particular employee. This employee discovers her rights as an employee have been violated and she subsequently files a complaint with the Federal Labor Board. The board investigator reviews all documents pertaining to this case, as well as those of other employees of the practice.

Investigators are allowed to go back three years into Dr. Seller’s employment and payroll records to look for additional violations. If violations committed by Dr. Seller are found, it will become the responsibility of Dr. Buyer to pay the money due plus any penalties and interest the labor board assesses. These fines can be staggering in the dollar amounts levied. The only recourse Dr. Buyer has to recover his financial losses would be by suing Dr. Seller.

How could this situation have been avoided? Any selling doctor involved in transitioning his practice and staff should provide a written a letter to each of his employees, advising them of the termination of his practice and their associated employment with that practice. This letter must have concrete documentation that each employee received it. Dr. Buyer must now interview each employee and rehire them as individuals (at his discretion, of course). This documented break in the chain of employment will go far to protect both buyer and seller from employment law claims arising from the actions of their counterparts.

Dentists who live on the west coast have probably seen television commercials with attorneys advising viewers that their employers may have violated their rights as an employee under federal employment laws. They follow up by asking the viewers to allow their firm to assist in any litigation that may be warranted.

This public awareness campaign will quite likely visit your town soon. As our dental staffs become better educated about their federally mandated rights as employees, we can be certain that there will be an increase in associated litigations involving dentists. This is one more reason to retain the services and expertise of an experienced and qualified broker when contemplating selling or buying a practice.

Max Wilson, DDS, is the founder of Professional Practice Associates Inc., a full-service practice brokerage firm doing business in Oklahoma and Arkansas. He is a member of American Dental Sales, the American Academy of Dental Practice Administration, the American Dental Association, and the Oklahoma Dental Association. He may be reached by phone at (405) 720-2093 or by writing to him at 5909 N.W. Expressway, #212, Oklahoma City, OK 73132. For more information on human resource and employment law compliance for health-care professionals, contact Bent Ericksen & Associates at (800) 679-2760.

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