Pitfalls for a Dentist to Avoid in Employer-Employee Relationships

Here is guest post from our friend Mike Limsky, Esq. 

Without proper planning, dentists may find themselves at odds with their own employees. The potential problems are many and include misunderstandings, resentments, and even lawsuits. As a Maryland attorney with 25 years of experience representing dentists and other medical professionals, I have seen firsthand the various pitfalls a typical employer-employee relationship may suffer. By taking proper precautions, however, many of these problems can be prevented. When counseling current and prospective clients, we often advise the following:

1. Maintain good personnel records.  Maintaining thorough and accurate records of all employees and independent contractors is the first step toward avoiding problems. These records should include the terms under which the individual is employed, including compensation amounts, bonus calculations, vacation allowances, continuing education provisions, and other benefits. Detailed information about any personnel problems, such as the nature of the matter, the date of each incident, and any disciplinary action taken, should also be included.
2. Avoid written office policies and employee manuals.  This may seem counter-intuitive, but we generally discourage clients from providing employees with written office policies or employee manuals. The problem is that employers may unwittingly deviate from the procedures specified in these documents. Especially when matters like compensation and termination of staff are involved, such deviations can lead to lawsuits, with your own employee manual as a primary exhibit.
3. Require employment agreements with restrictive covenants.  We strongly urge employers to have their professional and administrative staff sign employment agreements that include an adequate and enforceable restrictive covenant. Without these covenants in place, a dental practice may face unfair competition from a current or former employee whose activities were not properly limited for the benefit of the employer. For example, an employee could leave the practice and attempt to hire one of your other employees, market to your patients, or make off with office records.
4. Provide required post-termination compensation.  If an employee’s compensation includes a percentage of his or her collections, then as a matter of law, the employee may continue to receive such compensation after leaving the practice. Although the employee would no longer receive any base pay, he or she should still receive the percentage of collections attributable to his or her work. Employers who fail to provide such post-termination compensation may be subject to treble (“triple”) damages.
5. Be cautious about “independent contractors.”  Employers should be extremely cautious when attempting to hire someone as an independent contractor. Simply calling the individual an independent contract will not be enough; the IRS may conduct an investigation to determine whether the classification is appropriate. If the IRS concludes that the individual is not an independent contractor but an employee, the employer may be found liable for any deficiency in withholding taxes and the accrued interest and may be subject to stiff penalties. Before classifying a new hire as an independent contractor, the employer is strongly advised to seek the advice of an attorney or CPA to avoid running afoul of IRS rules and regulations.
6. Avoid common-sense problems.  Avoiding some pitfalls in the employer-employee relationship should be a matter of common sense. The following problems, however, occur often enough to make them worth mentioning:
   i.      Intimate relationships in the workplace. Employers should discourage their staff members from engaging in intimate relationships with other employees, especially between supervisors and subordinates.
   ii.      Cash payments to staff. Providing staffers with cash payments for compensation, reimbursement, etc., should be avoided. Issuing checks instead ensures a traceable paper trail in case a problem arises later.
   iii.      Inconsistent treatment of staff. All staff should be treated with the same degree of professional courtesy and respect.
   iv.      Denying overtime pay.  Be sure to follow state law requirements for overtime pay, which may include certain exceptions.
   v.      Discriminatory practices.  Decisions about matters like terminating an employee, providing bonuses, or giving promotions should not be based on characteristics such as age, gender, disability, religion, race, sexual orientation, etc.
7. Retain specialized professional advisers.  Before retaining an attorney, CPA, or other professional, look for someone who has extensive experience serving dental practices and whose client base is made up largely of dental practitioners. This experience and familiarity will be an essential benefit as you navigate the legal and professional intricacies that distinguish dentistry from other enterprises.

Working with dentists over the years has shown how often problems can arise between an employer and the staff. More importantly, it has enabled us to develop effective ways to prevent many of these problems before they occur. By taking sensible precautions, dentists can save themselves time, money, and a lot of stress.

Michael R. Limsky is a partner at the Maryland law firm of Summerfield, Willen, Silverberg & Limsky, LLC. His extensive experience as a business and corporate lawyer includes a special emphasis on the unique needs of dentists and other medical professionals. Please remember that the information contained in this article is intended to provide general information about legal topics and should not be construed as legal advice. Mr. Limsky can be reached at mlimsky@swsl-law.com or (410) 363-4444.

How Following Reference Check Best Practices Can Help a Dentist Avoid Legal Consequences

Hey Folks,

A long time friend of our firm, Jim Randisi has written an article on the legal importance of performing reference checks the right way. This is crucial in today's environment as a deterrent to embezzlement and other serious employee issues.




Have you been injured by an individual that you hired only to find out that same individual engaged in similar behavior for a prior employer? There are steps you can take to protect your firm from similar circumstances in the future.

ENABLE THE RIGHT TO NEGLIGENT REFERRAL

Employers have an obligation to provide truthful and factual information on past employees to prospective employers.

Let's talk about an example that probably happens often. You, as a prospective employer, are considering an applicant for a management position in your office. Assume that the applicant was “forced” to resign from a prior employer because the individual was using their position to steal money from customer accounts. Let's further assume that the individual was charged with criminal activity but agreed to make restitution as part of a plea agreement. The applicant might only indicate to you, the prospective employer, that they resigned. And, they will most likely fail to mention the circumstances under which they resigned

You, as the prospective employer, call the prior employer and tell the prior employer you are thinking of hiring the person for a position which would put that person in a similar position. The prior employer has an obligation to inform you of the truthful factual circumstances of that person's resignation. If the prior employer does not disclose the truthful, factual information surrounding that person's resignation, the prior employer could be held liable for the tort of negligent referral if that person likewise steals from you and causes injury.

You cannot enable negligent referral if you have not made the effort to call the prior employer and document the call.

Courts are increasingly intolerant of companies unwilling to communicate truthful, factual information about former employees. The courts are losing patience with employers concerned only with their own liability at the expense of society’s need to have access to reasonable information which prospective employers need to conduct business. This is particularly true if the former employee exhibited dangerous and aggressive behavior.

EMPLOYERS HAVE A PROTECTED PRIVILEGE

No cause of action automatically arises by a former employee if the communication is truthful and factual and given without malice. This type of communication enjoys qualified privileges in general. The law is well established that an employer has a qualified privilege to provide information about a former employee.

Many states have enacted statutes to further protect this communication. These statutes are designed to benefit society by encouraging honest references.

There is for example another case in which an employee was asked to resign after bringing a gun to work. His prior employer had given a reference that said that he was let go in a corporate restructuring and did not mention the gun incident. The individual then shot and killed three supervisors at his new job. That case, Jerner v. Allstate Insurance Co., No. 93-09472 (Florida Circuit Court, Aug. 10, 1995), was settled for an undisclosed sum.

Stating a truthful and documented fact between employers is always a defense to a claim of defamation. Who is helped when you don’t give a useful reference. When employers give only neutral references, the company risks potential liability for not warning other prospective employers that a bad actor is coming their way.

What can you say to prospective employers that inquire about former employees? The overwhelming advice is usually to say as little as possible.

That's almost all you need to know to deal with 99.5 percent of the situations you'll confront in responding to a reference check. Of course, you should at least acknowledge an employee's dates of employment, jobs held, and sometimes his pay rate. But what about the .5 percent of the cases in which more may be necessary?

TELLING IT LIKE IT IS

That was Howard Cosell's mantra. It's what many people who give employment references would really like to do. And you could get away with it most of the time because most employees are good and deserve favorable references.

But as one federal judge recently observed, in today's world, "It is not uncommon for a soured employer-and-employee relationship to lead to litigation -- whether meritorious or frivolous. Thus it should come as no surprise that statements [to prospective employers] have prompted litigation by former employees."

The fear of defamation claims has enabled more than one marginal or substandard worker to go from one employer to the next, leaving havoc in his wake.

An egregious example of that havoc, a case that should cause you to reexamine the "speak no evil" approach to references, was reported recently. In that case, a doctor left one hospital where his performance was substandard and took up his practice at a hospital on the West Coast.( Kadlec Medical Center v. Lakeview Medical Center, 5th Cir., No. 06-30745 (May 8, 2008).

The doctor's malpractice at the second hospital left a young mother in a permanently vegetative state.

After the young woman's husband recovered a verdict against the West Coast hospital, that hospital sued his previous employer for failing to warn it about the doctor's problems.

It was proven at trial that the first hospital knew that the doctor was a substance abuser whose professional competence was seriously compromised by his addiction, but it said nothing to the person doing the reference check.

The first hospital merely filled out a form confirming some basic facts of employment and declined to provide any more information, citing the volume of inquiries and the burden of responding more fully.

The employer learned the hard way that the law required more. Under the circumstances, it was obligated to disclose information about the former employee's performance problems so the prospective employer would be fully and accurately informed about him when making the hiring decision.

While the $4.1 million verdict against the hospital may be the largest of its kind, it isn't the first time an employer has been held liable for failing to disclose important information about a former employee.

Other cases have involved school employees whose patterns of sexually abusing students have been covered up so they can be quietly moved on to another unsuspecting employer. See Randi W. v. Muroc Joint Unified School Dist., 929 P.2d 582 (Cal. 1997) (victim of sexual molestation by vice principal had claim against school districts that formerly employed him, because they had recommended him without disclosing disciplinary actions for inappropriate conduct)

Lessons for employers

Lesson one: Do your homework. When you're hiring someone, don't just do a cursory background check. Call the applicant's references, and get as much information as you can. If the job involves tasks like working with children, the elderly, or other vulnerable populations, be especially thorough.

Negligent hiring cases also can involve hotel night clerks, cable television linemen, and other jobs that might put the employee in a one-on-one situation with customers. Check for criminal records in addition to calling former employers and references.

If the West Coast hospital hadn't tried to do a thorough background check, it wouldn't have had a claim against the previous employer that concealed important information and would have been stuck with the verdict against it.

Lesson two: Think twice before you give the name, rank, and serial number response to an inquiry from a prospective employer. If the employee it's asking about has a violent streak or a substance abuse problem that could present a danger to coworkers or the public, you seriously should consider passing that information along if it is truthful and factual and documented.

Of course, before revealing anything negative, double-check your information to be as certain as you can that you're correct. Some defamation cases have merit because the employer was too quick to pass along false information.

EMPLOYER ARE LIABLE FOR FALSE AND MALICIOUS STATEMENTS

In almost every case in which an employer has been found liable for statements made during a reference check the statements were false, made with malice, or made by someone lacking sufficient knowledge of the plaintiff’s employment.

Once you're satisfied that the negative information is both accurate and important for the prospective employer to know, choose a smart way to pass it along. That may be the hardest thing to do.

WHY EMPLOYEES SELDOM WIN

The reality of the threat of defamation from employer references is often well exaggerated. The reason employees seldom win these cases is because they must prove malice. In essence, they have to show not only that the statements made in the reference were defamatory and false, but also that they were unusually reckless and malicious and that the employer had no basis for making the statements at all.

HOW EMPLOYERS LOSE

Those employers that are found liable for defamation in the context of giving references have usually made statements that a reasonable person would not have made. e.g. “Yeah Joe worked for me and I think he is a no good drunk.” There are situations in which even a reasonable and careful employer can find themselves on the wrong end of a liability judgment. Reference checking is not one of these types of situations. An employer who sets up a proper system of guidelines, training and controls is generally protected from liability.


James P. Randisi, President of Randisi & Associates, Inc., has since 1995 been helping employers protect their clients, workforce and reputation through implementation of employment screening and drug testing programs. Mr. Randisi can be contacted by phone at 888.494.4050 or Email: jim@preemploymentscreen.com  or the website at http://www.preemploymentscreen.com/

The information in this article is not offered as legal advice. Randisi & Associates, Inc. is not a law firm and does not offer legal advice. This Presentation is not intended as a substitute for the legal advice of an attorney knowledgeable of the issues covered as they relate to a user’s individual circumstances.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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