1099/W2 Misclassification Concerns from Practice Owner

[Hank]

The owner’s new attorney is wrong, but you may have a hard time convincing the owner of this.

[Tim]

The owner’s new attorney is wrong, but you may have a hard time convincing the owner of this.

Fear sells and don’t overlook the interpersonal aspects. For a new client the motivation is to “show” how valuable I am by fixing all the past mistakes. The new attorney’s reliability maybe riding on this. You seem to be focused on a win/win solution. Stay in that position in order to not battle with the attorney. The contract modifications route allows for acceptance (compromise). Might allow the new attorney to “approve” even though it was pointless to begin with.
WBD in the past has recommended trying to identify the needs in any conflict in negotiations. Contract modifications keeping IC accomplishes that.

[Hank]

Of course the owner is paying hourly for this pointless bad advice.

[pulps]

Of course the owner is paying hourly for this pointless bad advice.

Funny you should say that, I wish that were the case. The owner disclosed to me that he pays monthly for the “all you can eat” legal plan. With legal advice, I believe a cheap attorney is often very expensive in the end.

The attorney has an incentive to create conflict that takes months to resolve. So far he has succeeded, and the owner sees this as a good value despite many upset associates..

[Hank]

Have you been planning to open your own specialty practice? Or perhaps work as a 1099 elsewhere? If so, now may be the time. Need to look at whether you have a non-compete and whether it’s enforceable in your state. (The material changes in your work classification and after tax income may be sufficient to establish breach of contract and invalidate an otherwise valid non-compete.)

Also, there aren’t displeased associates, there are displeased ICs who current management is trying to strong arm into an unfavorable employment situation.

While you likely have met all elements to be an IC instead of an employee, you also could hire an assistant instead of having the practice owner provide one. An employee can’t have his own employee; an independent contractor may have employees or subcontractors. (A dental assistant certainly would have to be an employee rather than an independent contractor.) Employing a DA would cost money, so you’d have to renegotiate your compensation upward, but it could open the door to an ERISA covered retirement plan rather than the limited asset protection of a solo 401(k).

[pulps]

Have you been planning to open your own specialty practice? Or perhaps work as a 1099 elsewhere? If so, now may be the time. Need to look at whether you have a non-compete and whether it’s enforceable in your state. (The material changes in your work classification and after tax income may be sufficient to establish breach of contract and invalidate an otherwise valid non-compete.)

Also, there aren’t displeased associates, there are displeased ICs who current management is trying to strong arm into an unfavorable employment situation.

While you likely have met all elements to be an IC instead of an employee, you also could hire an assistant instead of having the practice owner provide one. An employee can’t have his own employee; an independent contractor may have employees or subcontractors. (A dental assistant certainly would have to be an employee rather than an independent contractor.) Employing a DA would cost money, so you’d have to renegotiate your compensation upward, but it could open the door to an ERISA covered retirement plan rather than the limited asset protection of a solo 401(k).

Hank all good points. At one time, I had every intention of opening or buying my own practice. After seeing others run their practices with much stress and hassle, and making what I think is a very good living as a non-owner, I’m less enthusiastic about that path. The primary reason to own would be to have more say over operations, along with taking more of what I produce so I could work a bit less in the clinic for the same income. I’m open to the option of ownership but a well paid associate position where I get along with the owner and can have a say in operations would be an enticing alternative.

In the end, the tax classification was obviously not the owner’s sole concern. The new contract had far more favorable terms for him with the non compete, notice period (not reciprocal, he gives 1 month, employee must give at least 3 or subject to 5k penalty), and other things that suggested to me that he was using the opportunity to get better contracts that had nothing to do with worker classification. It is working so far, with some other dentists signing because they felt they had no other choice (mortgages, kids, pandemic, etc will do that and I don’t blame them).

When I told him politely I couldn’t accept the terms, that I would review another agreement and that an amendment to our current agreement would be preferable, he suggested our attorneys talk. After his attorney didn’t respond to mine for over a week, I got an email from the owner. As it is a small specialty, I know that during this time he was in talks with a few other providers seeking jobs. He said I hope you sign this contract because it is my final offer, and if you decline, this is your termination notice. I knew I wouldn’t stay there forever, and decided I didn’t want to work for him anymore, so I’m moving on. I was concerned that this wouldn’t be the last of unfavorable changes (unilaterally adding 1 hour to workday without increase in base pay before new contract discussions, a violation of the existing contract’s mutual consent requirement for scheduling changes), and that the new contract would embolden him even more.

I know you shouldn’t let emotions get the best of you in a negotiation, but I don’t like the way the owner treated me and my colleagues. I’m a fan of the win-win or no deal philosophy rather than the bad faith negotiation then ultimatum approach. Thanks to following the advice on WCI, my wife and I can afford to say “no thank you” to a deal when it doesn’t feel right.

Thanks for your advice on this. And feel free to share any advice on leaving on the best possible terms.

[Hank]

If you don’t already have it, you should have a professional “Dr Smith” website where patients and referring dentists can find you. Don’t cross the line on actively soliciting patients while they’re in the chair, but be quite find-able for when you leave.

The owner already breached the contract and caused you (and him!) to incur unnecessary legal fees to have the attorneys discuss this. That could be fine, but when the other attorney failed to communicate, there was no point for you to run up additional billable hours on your side. (A polite or even impolite “the new contract as presented is our final offer” would take two minutes to write and would bill out at no more than a half hour.)

Make sure you get paid everything you’re owed on the way out. I suspect he’ll try not to pay your last net production. Don’t worry about hurt feelings; you aren’t going to work for this jackass again. (You probably wouldn’t pull over if he was bleeding by the side of the road.). Do maintain good terms with the other doctors, staff, and patients. It’s likely you’ll see and work with some of them before too long given how the owning doc is using people, breaking contracts, and turning previously reasonable terms into quite lopsided contracts.

Frankly, I suspect you’re closer to financial independence than the owner. His actions sound like desperation rather than ethical long term business practices. One more argument for living within your means and having your stuff squared away financially.

[GastroMastro]

Hank all good points. At one time, I had every intention of opening or buying my own practice. After seeing others run their practices with much stress and hassle, and making what I think is a very good living as a non-owner, I’m less enthusiastic about that path. The primary reason to own would be to have more say over operations, along with taking more of what I produce so I could work a bit less in the clinic for the same income. I’m open to the option of ownership but a well paid associate position where I get along with the owner and can have a say in operations would be an enticing alternative.

In the end, the tax classification was obviously not the owner’s sole concern. The new contract had far more favorable terms for him with the non compete, notice period (not reciprocal, he gives 1 month, employee must give at least 3 or subject to 5k penalty), and other things that suggested to me that he was using the opportunity to get better contracts that had nothing to do with worker classification. It is working so far, with some other dentists signing because they felt they had no other choice (mortgages, kids, pandemic, etc will do that and I don’t blame them).

When I told him politely I couldn’t accept the terms, that I would review another agreement and that an amendment to our current agreement would be preferable, he suggested our attorneys talk. After his attorney didn’t respond to mine for over a week, I got an email from the owner. As it is a small specialty, I know that during this time he was in talks with a few other providers seeking jobs. He said I hope you sign this contract because it is my final offer, and if you decline, this is your termination notice. I knew I wouldn’t stay there forever, and decided I didn’t want to work for him anymore, so I’m moving on. I was concerned that this wouldn’t be the last of unfavorable changes (unilaterally adding 1 hour to workday without increase in base pay before new contract discussions, a violation of the existing contract’s mutual consent requirement for scheduling changes), and that the new contract would embolden him even more.

I know you shouldn’t let emotions get the best of you in a negotiation, but I don’t like the way the owner treated me and my colleagues. I’m a fan of the win-win or no deal philosophy rather than the bad faith negotiation then ultimatum approach. Thanks to following the advice on WCI, my wife and I can afford to say “no thank you” to a deal when it doesn’t feel right.

Thanks for your advice on this. And feel free to share any advice on leaving on the best possible terms.

I take it you're an endodontist based on your username. sorry this happened to you, but sounds like was the better long term play for you as this owner clearly was looking for a new, young associate to bully rather than value your accumulated experience. my family has had multiple similar experiences with dental owners (for general dental office).

[pulps]

About a year since I posted asking for advice on this, and figured I'd share an update. I negotiated a contract with a new practice, am working much less, am less stressed, and much happier. The last month at the previous practice was delightfully pleasant. The owner seemed genuinely surprised that I rejected his ultimatum, and admitted he didn't have anybody to replace me. He was gracious to me and kept my schedule full. I felt that we both rose to the occasion and tried to end things on the best possible terms.

Working less days at the new job opened up the door to teaching more and doing hospital cases which I enjoy and which happen to be productive. I gave up more than 100k in income, but my wife and I still have more than enough to meet our needs and save significantly for our future.

Oh, and the same practice owner who told me I was terminated if I didn't agree to his terms, he reached out last week to see if I could help out. Said he wasn't trying to steal me (unless I wasn't happy with my new job) but laid on the flattery thick and said he "might have been too stubborn with the contract." Yessir, you were, and no, I will never go back to relying on you for my primary source of income. But maybe for kicks I'll come help out a few days/month. Validation in many ways.

Anyways, I hope somebody going through a similar challenge reads this and that their professional breakup opens up some amazing opportunities.