Legal Bite Question of the Issue
I Gave Away My Practice
By Frank Recker, DDS, JD
Q. My now former associate had been employed for about 12 years. As
required by our written agreement, she gave the required 60-day notice of
termination. However, she failed to mention that she had already formed her new
professional corporation, copied computer records for patients she had seen over
her long period of employment, and had prepared to send a letter soliciting them
as her patients. When she opened her own, new practice on the 61st day after
her notice of termination, a large segment of my dental practice left and headed
to my former associate’s new practice. Oh yes, she also took several of my key
employees with her. What did I do wrong?
A. Unfortunately, this situation recently happened to a new client of mine.
Although we all are aware of the need for written contracts for dental associates
containing specific protections for the employer, employee departures still remain
a potential “hot spot” in the dental litigation arena. While the contract attempted
to address the “non-competition” issues upon termination, it failed to do so in a
clearly detailed manner.
Firstly, my client was so stung by this event, he failed to take immediate action,
thereby greatly lessening his chances of obtaining an injunction for unfair
competition. His contract clearly stated that the associate was never, for any
reason, to take any form of any proprietary information, including patient records.
Everything she did was done at my client’s office and during time when the
associate was to be working for my client.
Even though the associate’s new practice was outside the “restricted
geographical area of ten miles,” she sent letters to all the patients she had seen
during her employment regardless of location. She wrote that she was,
“informing’ them of her new practice and that she was notifying ‘her’ patients of
her move!”
It is clear that she had also been developing her new practice site and formed
her new professional corporation during her employment. Clearly, she had
breached her fiduciary obligations of good faith and fair dealings, owed to her
employer.
While this case hasn’t completely yet played out, it underscores the premise that
the longer an associate is employed in your practice, the more specific and
protective should be the terms of the contract. I favor escalating provisions in
employment agreements, and the right to seek an immediate injunction against
any such breach, in addition to specifying damages in a specific amount for each
patient lost as a result of the departure of an employee dentist.
Proving actual damages in court is difficult. Having an agreed upon amount in
the employment contract is both a deterrent to such behavior, but also provides a
basis upon which a tribunal could ascribe damages.
Be fair, but don’t allow your practice to be taken advantage of by a scheming
associate who wants to create an “instant” practice using your patients.