An optometry employment contract may sound straightforward, but it’s incredibly important. A well-crafted contract clarifies expectations for both employers and employees and acts to establish their working relationship before the first day of work begins. As an optometry employer, it's critical that you understand all of the legal ramifications of this document to ensure both your new optometrist—and your practice—are successful.
We sat down with Daniel Goodrich, Esq. of @VirtualCounsel to discuss the complex topic of optometry employment contracts. Goodrich, who also serves as CovalentCareers general counsel, practices corporate, transactional, and business law and is licensed in California, Hawai'i, District of Columbia, and New York (pending). Goodrich originally served as the in-house legal team for a multi-national telecommunications organization before founding @VirtualCounsel in 2018.
In our recent survey, we found that 47% of optometrists in their first year earned over $100,000. In their second year and beyond, 62% earned over $100,000. However, the average salary satisfaction amongst ODs was 6.45 out of 10. When it comes to contract negotiation, compensation is really one of the most contentious subjects.
“With optometry specifically, as student loans are increasing, you’re going to get a 6.4 satisfaction rate,” says Goodrich. “Students are becoming more empowered to negotiate or demand a higher salary, especially as large optometry practices are able to compensate that way.”
How does production-based income affect salary rates?
There are several methods for determining production-based income. The first type of production bonus works by net collections, and usually runs at 13-18% of net revenue collected by that optometrist. The second form is per diem, in which the optometrist receives a percentage of collections over $2k for the day. The last form utilizes quarterly or yearly bonuses that are production-based.
“I believe that any employer, across any industry, who can fairly compensate with production or some type of commission, should,” says Goodrich. “Why would we not incentivize our employees to build the business?”
However, the issue of fairness isn’t a minor one. With a new optometrist, production-based bonuses are tricky. A new OD might not have had enough time to build a patient network, and might be spending most of their time getting comfortable with treating patients.
“I think another, softer, emotional intelligence point that employers often skip is, does this compensation structure that I have adopted or concocted match the OD?” says Goodrich. “Not every OD has the same type of skills from a sales and marketing perspective to benefit from a production bonus. It’s set up to fail from the beginning if it’s not a match to the person.”
As always, it’s crucial to be precise with contract language. If your compensation bonus is a percentage, and as an employer you desire that net collections be from a specific source, it’s crucial to provide that within the contract—if only to provide your optometrist with direction and an idea of what you and the practice value.
Make sure to consistently schedule conversations around raises and performance reviews. It’s useful to have those baked into contracts, as well, so that everyone involved knows when to have them and how to benefit from them.
“Something that is coming up more frequently is a retention bonus,” says Goodrich. “I see that coming in, and it ties in a big way to increasing student loans.” A retention bonus is often used to bring on new ODs right out of school who are also aware of the importance of paying off their student loan debt quickly. This is often used by optometry practices looking to attract ODs who are hoping to put down roots, and willing to sign contracts that stipulate that they will stay with a practice for a given number of years.
These kinds of compensation tools are useful for practices looking to hire ODs in a highly competitive market. A retention bonus might turn out to be substantially cheaper than the cost of vacancy.
Types of contracts: Independent contractor vs employees
Many optometry practices hire optometrists as independent contractors when really they should be classified as employees. “Unless this OD is coming in at their leisure, at their hours, with their own equipment—they’ve got their own business—they’re an employee,” says Goodrich. “It blows my mind how often employers get this wrong. That’s the threshold topic of this entire discussion: we’re talking about an employment contract. If you bring someone on as an independent contractor, you’re exposed.”
Because small businesses are often unwilling to deal with all of the baggage that comes with employment agreements—benefits, insurance, labor laws, and so on—it’s easy to slide into misclassifying employees as independent contractors. However, that misclassification opens a practice up to substantial risk. So it’s crucial to double-check the requirements in your state and talk with your attorney about how your employees and independent contractors are classified.
Of course, if another OD is renting space, or leasing space and equipment but seeing their own equipment, that’s another story! “That can very squarely fit within an independent contractor relationship,” says Goodrich, or even more of a partnership arrangement.
Check out our live panel with Daniel Goodrich, Esq. from Vision Expo 2016!
Exempt versus non-exempt
Time tracking can be an administrative burden for employers, Goodrich acknowledges. So it can be very appealing to classify employees as exempt—however, many states have responsibility and salary requirements for classifying employees as exempt or non-exempt.
For determining whether your employee is non-exempt or exempt, says Goodrich, “there’s a formula that changes every year—it bumps up every year, which isn’t favorable for employers.” Under that yearly salary, an employee cannot be classified as exempt. For many states, that salary is substantially lower than the average salary for ODs, which makes this question much more important when it comes to compensating and classifying practice staff.
“Non-competes are great to talk about,” laughs Goodrich. “They’re also great to have in your contract. They’re also often unenforceable.”
Non-competes are a clause in an employment contract that forbid employees from working for competitors either entirely or without prior approval. “If you’re coming in part-time, I think it’s unreasonable to expect that person not to work for a similarly situated private practice in town—your competition,” says Goodrich. “But for a full-time employee, it’s super relevant. It also becomes relevant post-termination, and that’s the tricky part. Can an employer enforce a non-compete clause after the employee is terminated or leaves?”
Some optometry-specific exceptions include strictures around poaching patients. For medical practices, medical records are property of the employer. “When we talk about non-competes, we often talk about raiding of patients, and there is legitimacy and enforceability precluding optometrists from stealing patient records,” says Goodrich.
However, it’s not reasonable to expect ODs to completely ghost their patients. People have the right to choose their medical provider. Let your ODs tell their patients they’re leaving—the alternative isn’t good for your patients or the practice, regardless of whether those patients follow the OD who’s left or not.
Amending an employment contract
“There should be an amendment clause in there,” says Goodrich. An employment contract should allow for amendments provided both the employer and employee agree to the changes to the contract.
When it comes to timing, those amendments can be made at any time, so long as both parties agree to the changes.
If a contract has been signed and accurately reflects the agreement made between employer and employee, it’s official. However, that contract is less important than your real, day-to-day professional relationship with your employee. It’s absolutely crucial to have regular conversations with your employees about their experience and their expectations, and work with them through what they need from you as their employer, and what you can reasonably (and legally) be expected to provide.
“I advise my clients not to focus so much on formally amending contracts and more so on having real conversations with their staff and their employees,” says Goodrich.
One final disclaimer—this is not legal advice, and for every specific issue with your employment contract, you should definitely consult with an attorney. Goodrich’s final recommendation is to always have real, intentional conversations—whether you’re an employee or an employer.