Those who engage with dentists to perform dentist services in their practice generally need to consider whether they will be engaged pursuant to an Employment Agreement, an Independent Contractor Agreement or a Service and Facility Agreement (and sometimes rarely licensing agreements).
Whilst each of these has advantages and disadvantages it is fair to say that it is becoming a little more common for entities to engage with dentists as employers and employees – perhaps back to the future.
Historically, Service and Facility Agreements or even Independent Contractor Agreements have been used to supposedly convey the benefits of a reduction in payroll for the purposes of various payroll tax schemes in each state, a reduction of need for insurances and a reduction in liability because the entities who employ them have some vicarious liability, meaning a responsibility for those who they employ.
Whilst these considerations still exist there are some changes in the last 10 years which practitioners should be aware of that may make them reconsider Service and Facility Agreements:
- Payroll Tax is triggered in each state once payments that are made to people for labour or employment exceed approximately $1 million dollars. The amount of payroll tax that is payable for small to medium enterprises such as dental practices is not incredibly onerous for example in NSW it is 5.45 %. There is a requirement in some jurisdictions if not all that persons who work pursuant to Service and Facility Agreements and or Independent Contractor Agreements can be determined to be workers and wages under the payroll tax schemes. So sometimes these arrangements are not effective.
- In addition Workers’ Compensation was notionally not necessary to be paid by entities for people who were not employees however there has been changes to these schemes over the years so that these apparent disadvantages of employment are not so obvious any more because there is a requirement in many jurisdictions to pay Workers’ Compensation.
- Vicarious Liability – there is a change because of the Health Practitioner National Law in each state has meant that principals -particularly if they are registered health practitioners – who engage with dentists with Service and Facility Agreements have been to some degree responsible in a regulatory sense for the treatment provided as part of the facility. It is no longer necessarily the case that regulators will only look at the individual practitioner who provided the dental treatment services, rather they can in some cases look to the provider of the Service and Facility- or to put it bluntly- who received the fees. This means practitioners can be defending debt claims in tribunals as well as with the regulator at the same time.
- Control – the advantage of an Employment Agreement is that dentists who work for employers can be strictly controlled. They can be terminated pursuant to the provisions of the Fair Work Act and while this is an easier jurisdiction for people to seek redress it is not an onerous jurisdiction for employers to work within.
Practices have tried to engage dentists but in an attempt to escape some relatively minor liability, they end up creating problems with managing dentists who work in the practice.
Overall the concept that seems to have pervaded the industry that dentists should be employed pursuant to Service and Facility Agreements creates risks in that there can be a liability in certain circumstances for unpaid leave and include long service leave and certainly for superannuation, as can be seen from the recent case of Moffet v Dental Corporation. See this article for a further discussion of these issues.
Employment Agreements for dentists need to address common issues that arrive in dentistry and using templates for other businesses, professions, industries is not appropriate in these circumstances.
If as an entity you wish to engage with dentists then it might be the case that a Service and Facility Agreement may no longer be the appropriate arrangement simply because the benefits may not outweigh the risks of a future liability as recent case law has shown.
Courts Commissions and Tribunals may make determinations that under other non employment agreements dentists can be workers or employees for the purposes of the relevant jurisdictions being superannuation, Fair Work Act, Long Service leave and WorkCover- no matter what the contract says and no matter how the dentists are paid – even by invoices to companies for example.
In other words in an Employment Agreement there are less unknowns.
Proper employment contracts for dentists including provisions in relation to basic salary and a total amount of remuneration expressed as a percentage can be drafted and can be provided to be used where dentists wish to have control over their practitioners.
Of course pressing these rights may not be not cost effective. And there can be arrangements in place to further protect practice owners in some circumstances.
Call 07 30071777 to discuss these options if any of these issues may have application to you as a practice owner or dentist working for a practice.