Is your Practice Model Setting You Up for a $300,000 fine? Ours was

article featured image

Here’s what we did about it...

It was about two years ago. My wife Risa, a Marriage and Family Therapist with a thriving group practice, met with a colleague. When she came home, what she told me was shocking.

His group practice had just been audited by the state. The audit had concluded that his associates, who had been classified as independent contractor for years, should have been classified as employees.

The state fined him $300,000!

Luckily, he managed to convince them to reduce the fine to “only” $5000. At least it wasn’t practice-ending, bankruptcy-inducing. Still, a multi-thousand-dollar fine is no fun at all.

That was a wake-up call. We didn’t even know that the state would determine that associate therapists had to be considered employees. Hardly any group practice we knew of had gone that route. We realized we needed to consult with a legal professional to figure out our own potential liability, so we set up a meeting with an employment attorney.

The attorney didn’t pull any punches. Yes, we had to change over to an employee-based practice, and the sooner the better. Within a few weeks we had all the details ironed out and changed Risa’s practice over to having all associates be employees. It wasn’t simple or cheap, but knowing that we’re complying with the state’s interpretation of this somewhat gray area of the law gave us peace of mind, and even had a variety of benefits, which I’ll discuss in a future article.

To help all of you, I asked our attorney, Veronica Jackson of Miles & Stockbridge, if she’d be willing to let me interview her on your behalf. She agreed, and here it is.

What are the most important things about employment law that a therapist needs to know before expanding a solo practice into a group practice? What are some common legal pitfalls you could fall into?

It varies by practice, but don’t assume that your associates can be designated as independent contractors when really, under the law, they may be considered employees. Just calling a therapist an independent contractor in an agreement doesn’t necessarily make it so. Get legal counsel so your agreements are legally sound and properly classify the nature of the relationship.

What are some of the risks of building a group practice by bringing in independent contractors as associate therapists?

Many business owners incorrectly believe that they’re retaining an independent contractor as an associate when they may really have a misclassified employee. Doing this could expose you to liability regarding unpaid wages, unemployment insurance, workers’ compensation coverage, and a host of other requirements owed to an employee — some of which can’t even be waived by the employee.

A true independent contractor relationship may limit the amount of control you have as a practice owner regarding key elements of your practice, like where associate sessions take place, the time appointments are offered, and the way the associate markets his or her services.

When expanding from a solo practice to a group practice, what documents do owners most frequently need legal help with?

Particularly in the context of therapists, agreements or policies containing provisions about confidentiality, restrictive covenants regarding competition and solicitation (of employees and clients) have to be carefully drafted to reduce the likelihood that someone claims there has been overreach, and to avoid a violation of a therapist’s code of ethics. As a practice owner, seek legal advice regarding employment offer letters and handbooks for legal compliance with a host of federal, state, and local laws.

When hiring an employment attorney, what are the top things a client can do to reduce costs?

First, follow your attorney’s legal advice. Not doing so could waste money and expose you to liability down the line. Second, and this seems counter intuitive, keep your Internet research to a minimum. Issues may take longer to discuss and resolve if your attorney has to devote time debunking Internet-researched legal theories. There is nothing wrong with doing some preliminary research to familiarize yourself with the issues, but the Internet is full of outdated and inaccurate advice.

What’s the most important thing a client should look for when hiring an employment attorney?

The most important is for you to feel comfortable communicating with your attorney and trusting his or her judgment. Many of the issues faced will require judgment calls and involve gray areas of the law. Anything you can do to gain that familiarity and trust up front helps. For example, conversations about preferred communication methods and your underlying business are very helpful.

Why shouldn't I just copy a colleague's employee handbook (or offer letter, or contract, or client intake forms) and tailor it (them) to my needs?

I advise against that for the same reason I recommend not taking legal advice from Google. Information in a colleague’s employment documents could be outdated, inapplicable to your business, and sometimes just flat out wrong. You have to take into consideration that these documents vary by jurisdiction, sometimes down to a city or county, so even if your colleague has up-to-date documents that are valid for her practice, they may not be precisely applicable for your practice.

Attorneys can often make the drafting process more efficient because they may have reviewed and drafted many handbooks, contracts, etc., so they already know what works and what doesn’t. However, I would discourage non-attorneys from cutting corners by using documents from another employer. It’s worth the money to get current legal advice from an attorney so you know the documents meet your needs and are legally sound where you practice.

Disclaimer: The content of this post is for general information and is not intended to be, and should not be taken as, legal advice for any particular matter. It is not intended to and does not create any attorney-client relationship. The opinions expressed and any legal positions asserted in the article are those of the author and do not necessarily reflect the opinions or positions of Miles & Stockbridge, its other lawyers or OG Business Coach, LLC.

Want More?

If you want to know more about expanding your solo practice into a group practice, changing your practice over from using independent contractor associates to employee associates, or other financial strategy matters, send me an email and we’ll set up a free, no-strings-attached call. My promise is that by the end of the call you will be aware of some important things you’ll need to do, and will have insights and ideas to pursue, whether with or without my support.

Any employment-law inquiries can be directed to Veronica Jackson at Miles & Stockbridge. 

Older Post Newer Post

Comments (0)

Leave a comment