Reduction in Salary

[DOCnAbox]

Has anyone in private practice been asked to take a reduced salary? If so do you mind commenting on percent reduction and terms of new salary regarding time limits? Has anyone been furloughed from their practice? If so, is this a direct breach of your contract?

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[increscence]

I actually offered at the outset of the pandemic to reduce or forgo pay if it meant that our staff would maintain their salaries. We're a small, close-knit practice that feels like family. Call me naive, but my bosses/the practice partners have always been remarkably fair and honest with me, so I didn't hesitate to do this. My family and I are fortunate to have enough savings to weather the storm.

All the ODs and MDs, myself included, have now drastically slashed their salaries for the foreseeable future in favor of paying the staff as much as possible. It's been a balancing act in terms of our abbreviated clinic hours vs their unemployment benefits, but I think we've navigated it pretty well.

I have not looked into whether this is a breach of my contract. I'm sure I could argue that it is, but I'm not going to pursue it unless something goes seriously wrong in the future. I don't feel that I've been swindled or taken advantage of. I know that I am in a unique position, in that I actually like my boss.

 

[dantt]

Has anyone in private practice been asked to take a reduced salary? If so do you mind commenting on percent reduction and terms of new salary regarding time limits? Has anyone been furloughed from their practice? If so, is this a direct breach of your contract?

Is this a reduced salary or a salary deferral? (Gets paid back when cash flow improves)

 

[CECFellow2018]

I'm a new practice owner. Me, another MD on commission, and OD on salary.
I'm taking 0. MD on commission (which means down 95%), and OD down 60%.
Still had to furlough some staff.
PPP grant approval will change thing slightly; but basically yes; massive drop off of income for most of us for next 2-3 months I'm assuming.

 

[MstaKing10]

We are taking a 50% reduction. I work with a practice where several of the doctors were furloughed (private equity owned). Our volume is down about 50% (we are retina so less impacted than general), so the 50% cut seems very reasonable. Has allowed us to keep the lights on and keep most of our staff for now

 

[DOCnAbox]

I actually offered at the outset of the pandemic to reduce or forgo pay if it meant that our staff would maintain their salaries. We're a small, close-knit practice that feels like family. Call me naive, but my bosses/the practice partners have always been remarkably fair and honest with me, so I didn't hesitate to do this. My family and I are fortunate to have enough savings to weather the storm.

All the ODs and MDs, myself included, have now drastically slashed their salaries for the foreseeable future in favor of paying the staff as much as possible. It's been a balancing act in terms of our abbreviated clinic hours vs their unemployment benefits, but I think we've navigated it pretty well.

I have not looked into whether this is a breach of my contract. I'm sure I could argue that it is, but I'm not going to pursue it unless something goes seriously wrong in the future. I don't feel that I've been swindled or taken advantage of. I know that I am in a unique position, in that I actually like my boss.

That is great that you took the initiative in reducing your salary for the sake of your workers. We are small practice too and feels like family for the short time I have been here. I am a new hire and have been billing 50-60K per month but we obviously have been seeing patients few and far btw. I discussed the reduction of my salary with my boss and he will reduce by 50% until back up to speed. I am worried about an amendment to contract not having any wording reflecting time-limited (especially because I have over 200K in refinanced loans with only 60 day forbearance). I am grateful to have any salary at all given I can pay my mortgage, bills, and food for my family but I am hesitant to sign anything. It doesn't make sense to discuss with my lawyer because of course, he will say don't sign anything. I feel a moral obligation to take a reduction in salary but I'm not sure how many months I can survive given my loan burden. I have about 3 months of savings and would have more but I've been throwing everything at loans since I started in October 2019. I'm hoping we get the SBA loan soon so we can make our staff whole again and hoping the curve flattens soon for everyone's sake. I know there are so many out there struggling much more than we are.

 

[DOCnAbox]

Is this a reduced salary or a salary deferral? (Gets paid back when cash flow improves)

They mentioned that this would not be paid back but I could still make my bonus (no chance of that happening now). It's a bit frustrating because I made the practice my salary in about 4 months of working but I understand they have to pay staff, rent, bills, etc. Oh well... I didn't become a doctor to be rich

 

[clayito]

Our practice, like many right now, is in this situation. Lots more details than what I’ll share below, but the summary is this:

I am one of 7 partners, and we hired a new MD in summer 2019 on a one year associate contract. The plan was to offer a nice salary ($22,500 monthly), offer partnership after one year (as we have done historically), and offer a bonus at the end of the year based on production above salary.

The associate started in October and hit the ground running, easily making his salary in Q4 2019 plus a little, setting himself up for a likely bonus at the end of the contract year. Then COVID-19 hit, and he saw about 10-20 patients per week over the last 3 weeks. All the partners dropped our monthly salary to 40% of normal, and we are doing our best to keep staff paid and overhead paid in general.

The problem is the associate thinks he should not take a pay cut “because it’s in my contract“. Our managing partner talked to this doc and explained our reasoning, i.e., everyone is taking a huge pay cut right now, but the associate won’t budge. In his contract, we can terminate without cause with 90 days notice, thus we are left with a decision to cut him or try to continue to talk some sense into him. Although he has been easy to get along with so far, many of us partners are now thinking, “do we want this guy as a partner if he is like this as an associate? He doesn’t seem like much of a team player.”

I guess my message is this: if you are employed right now, be a team player. I’m not saying roll over and let people take advantage of you, but please consider what the owners/partners are dealing with right now. This situation isn’t good for anybody, but this too shall pass.

 

[MstaKing10]

Wonder what kind of legal ramifications that would have if you terminated without cause. Would the associate have a case against you for terminating? Totally agree they are being unreasonable but don’t be surprised if they lawyer up. Tough situation

 

[docdoc2012]

Coming from an associate's perspective at a large corporate practice who already took a 50% paycut and is now being asked to move to production, I understand why your associate is not budging. Being a salaried employee you have no control over your daily workings, nor do you have any insight or say into practice spending, and have no access to partner bonuses during the good times. The only thing you have is a security of a paycheck, and the surity of a contract.
Not budging at all makes no sense, especially if you see a future at your practice. But asking a salaried employee to take a bigger hit is not right

 

[CECFellow2018]

If my salaried OD refused to budge; like most contracts; Id be forced to terminate but pay out 90 days. Ultimately up to what the employee values in terms of long term career goals

 

[airplanes]

It makes rational sense for the associates to take a cut as well if the senior partners are doing the same but from a legal standpoint, termination may be the only option if they don't budge. Perhaps it's a bluff. I agree associates should not be taking larger cuts than partners.

Wonder what kind of legal ramifications that would have if you terminated without cause. Would the associate have a case against you for terminating? Totally agree they are being unreasonable but don’t be surprised if they lawyer up. Tough situation

Good thought. I feel like most associate contracts I reviewed during my job hunt a few years ago had a 60 or 90 day termination with notice and did not specifically require cause.

 

[dantt]

The problem is the associate thinks he should not take a pay cut “because it’s in my contract“. Our managing partner talked to this doc and explained our reasoning, i.e., everyone is taking a huge pay cut right now, but the associate won’t budge. In his contract, we can terminate without cause with 90 days notice, thus we are left with a decision to cut him or try to continue to talk some sense into him. Although he has been easy to get along with so far, many of us partners are now thinking, “do we want this guy as a partner if he is like this as an associate? He doesn’t seem like much of a team player.”

I think in general most doctors are very easily to get along and work with (not everybody unfortunately). Unfortunately disputes do happen and it is almost always related to money. As mentioned by others, when one works as an employee, the expectation is that you exchange high income ceiling for job security. Hearing “do we want this guy as a partner if he is like this as an associate? He doesn’t seem like much of a team player.” I'm sure stirs negative emotions for many people out there. That being said, sharing in the salary reduction to help preserve the practice is certainly reasonable. I've heard of many practices out there cutting their employees loose completely.

 

[MstaKing10]

I think in general most doctors are very easily to get along and work with (not everybody unfortunately). Unfortunately disputes do happen and it is almost always related to money. As mentioned by others, when one works as an employee, the expectation is that you exchange high income ceiling for job security. Hearing “do we want this guy as a partner if he is like this as an associate? He doesn’t seem like much of a team player.” I'm sure stirs negative emotions for many people out there. That being said, sharing in the salary reduction to help preserve the practice is certainly reasonable. I've heard of many practices out there cutting their employees loose completely.

No negative emotions stirred here. Very reasonable argument to not make a partner of someone that will be difficult to work with. How is this different than any other industry? If there are hard times financially there will be cutbacks. This happens in corporations and other sectors around the world. Have you seen the unemployment numbers? Insane!

Certainly we all expect to be treated fairly and compensated appropriately for our work, but this sense of entitlement is a real problem, and if the numbers don’t add up at the end of the day this is a financial decision. Numbers don’t lie.

 

[docdoc2012]

No negative emotions stirred here. Very reasonable argument to not make a partner of someone that will be difficult to work with. How is this different than any other industry? If there are hard times financially there will be cutbacks. This happens in corporations and other sectors around the world. Have you seen the unemployment numbers? Insane!

Certainly we all expect to be treated fairly and compensated appropriately for our work, but this sense of entitlement is a real problem, and if the numbers don’t add up at the end of the day this is a financial decision. Numbers don’t lie.

I see your point as having more credence if the associate/employee is a profit participant. Why must an associate assume the same risk as partners but not of the benefits when times weren't hard?
I agree it makes sense to atleast take some decrease from a simply moral perspective - help keep employees less fortunate than you employed etc. I also agree that if the associate sees a future for themselves at the practice should approach it with more of a sense of ownership. But the whole point of an associate period is to have some financial security while you build, and you take a financial hit in exchange for a couple of years by not eating what you kill if you are doing well. It's a trade - off. And it's in times like this that this trade-off should confer some protection (once again, I do think its unreasonable not to budge at all).
This is the reason why associates have contracts. So they can't just be cut loose.

 

[TheLesPaul]

99% of the time, having a salaried employee benefits the practice, as they get to keep the earnings above the money they pay out to him/her. The only advantage of being salaried is protection. I don't see why the practice should benefit when the going is good, and then be able cut the employee loose when they are on the wrong side of the equation. Coupled with the news of pay cuts for ED docs and others on the front lines in NYC, trust is in short supply.

If the practice does not have enough cash to pay their salaried employees, the partners of the practice should either apply for aid (PPP) or shell out of their own pocket to supply the contractually obligated amount. Just as they share in the profit, they should share in the loss, unless they are willing to reduce the amount of buy-in or make up for the financial shortfall in another way.

 

[MstaKing10]

There’s no protection for anybody at times like these, including partner physicians. There’s no such thing as a guarantee or total job security. All of us are at risk. The “good times” happenwell before this employed physician joined the group. Why should they be entitled to those proceeds?

Look at it another way, this employees other option would have been to start their own practice last year. Where would they be now? You guessed it!

At any rate, hope these tough times come to an end soon for everyone’s sake. The silver lining would be if the employed physician still became partner next year. He was thus paid as an employee during the bad times when partner physicians were not making much more. In that sense, he was not really underpaid during his employee years. This happened to me when I was buying in to my practice and it greatly reduced my buy in, though, this was not due to a pandemic!

 

[MstaKing10]

99% of the time, having a salaried employee benefits the practice, as they get to keep the earnings above the money they pay out to him/her. The only advantage of being salaried is protection. I don't see why the practice should benefit when the going is good, and then be able cut the employee loose when they are on the wrong side of the equation. Coupled with the news of pay cuts for ED docs and others on the front lines in NYC, trust is in short supply.

If the practice does not have enough cash to pay their salaried employees, the partners of the practice should either apply for aid (PPP) or shell out of their own pocket to supply the contractually obligated amount. Just as they share in the profit, they should share in the loss, unless they are willing to reduce the amount of buy-in or make up for the financial shortfall in another way.

I’m not buying this times are good times are bad argument. When times are good everyone benefits and when times are bad everyone suffers. Employed or not.

That said I completely agree with your last sentence. If you stick through these tough times then fair compensation once things settle makes sense. Wether it be a bonus or a reduction in the buy in or accelerating the partnership track would definitely demonstrate good Will on the side of the practice

 

[dantt]

I’m not buying this times are good times are bad argument. When times are good everyone benefits and when times are bad everyone suffers. Employed or not.

For sure. I just don't think the black cloud of not being a "good team player" counts when we're talking about money and contracts. Not being a good team player would be refusing to see the occasional patients when you're not on call, not taking care of difficult patients, etc. Obviously very few practices are able to maintain salaries while when income is not coming in. I think your associate will understand and agree to a salary cut.

 

[docdoc2012]

I’m not buying this times are good times are bad argument. When times are good everyone benefits and when times are bad everyone suffers. Employed or not.

True. But the point is everyone benefits to a different degree. The flipside of greater benefit is greater risk.
If an associate isn't entitled to benefit from years of practice building before they were there, then why should they be held responsible for business decisions and spending issues they had no input in or control over? And that too to an equal degree as a full fledged partner?

 

[anonperson]

Our practice, like many right now, is in this situation. Lots more details than what I’ll share below, but the summary is this:

I am one of 7 partners, and we hired a new MD in summer 2019 on a one year associate contract. The plan was to offer a nice salary ($22,500 monthly), offer partnership after one year (as we have done historically), and offer a bonus at the end of the year based on production above salary.

The associate started in October and hit the ground running, easily making his salary in Q4 2019 plus a little, setting himself up for a likely bonus at the end of the contract year. Then COVID-19 hit, and he saw about 10-20 patients per week over the last 3 weeks. All the partners dropped our monthly salary to 40% of normal, and we are doing our best to keep staff paid and overhead paid in general.

The problem is the associate thinks he should not take a pay cut “because it’s in my contract“. Our managing partner talked to this doc and explained our reasoning, i.e., everyone is taking a huge pay cut right now, but the associate won’t budge. In his contract, we can terminate without cause with 90 days notice, thus we are left with a decision to cut him or try to continue to talk some sense into him. Although he has been easy to get along with so far, many of us partners are now thinking, “do we want this guy as a partner if he is like this as an associate? He doesn’t seem like much of a team player.”

I guess my message is this: if you are employed right now, be a team player. I’m not saying roll over and let people take advantage of you, but please consider what the owners/partners are dealing with right now. This situation isn’t good for anybody, but this too shall pass.

What's the point of the contract if you are going to try to unilaterally change the terms. The whole point of a guaranteed salary is the guarantee in good times and bad.

Your group was benefitting greatly because he was essentially outperforming his contract. Other than a bonus, if he made massive collections for the group in his first year, would you entertain him trying to change the terms of his contract so he made more? I don't think so.

That's like my mortgage company telling me in year 23: due to massive inflation, your payments are not worth as much. We want to increase the amount paid because it's not fair.

You have your out in the 90 day termination clause, but don't try to paint an associate trying to collect their contractually obligated amount as unreasonable.

If he agrees to the decrease in pay, is the practice going to pay him back the difference when times become good?

 

[TheLesPaul]

Your group was benefitting greatly because he was essentially outperforming his contract. Other than a bonus, if he made massive collections for the group in his first year, would you entertain him trying to change the terms of his contract so he made more? I don't think so.

I think that's the key. Pay him back the difference or correspondingly reduce the buy-in/bonus structure. Money is money. It has nothing to do with "teamwork" and everything to do with legal obligation. And your statement about "good will" is very nebulous. People tend to be quite amnestic when the bad times are past. It should be spelled out exactly what the financial renumeration will be once the season is over. As a partner, that is your responsibility to the associate if you are going to ask him to take a pay cut.

 

[anonperson]

There’s no protection for anybody at times like these, including partner physicians. There’s no such thing as a guarantee or total job security. All of us are at risk. The “good times” happenwell before this employed physician joined the group. Why should they be entitled to those proceeds?

Look at it another way, this employees other option would have been to start their own practice last year. Where would they be now? You guessed it!

At any rate, hope these tough times come to an end soon for everyone’s sake. The silver lining would be if the employed physician still became partner next year. He was thus paid as an employee during the bad times when partner physicians were not making much more. In that sense, he was not really underpaid during his employee years. This happened to me when I was buying in to my practice and it greatly reduced my buy in, though, this was not due to a pandemic!

The current pandemic situation is unusual but the associate signed a contract with a guaranteed salary with a bonus. He has a ceiling to his earnings for the very purpose of getting his contractually agreed upon salary. It's a risk averse decision that most new doctors take.

If he outperformed his contract this year and collected a huge amount for the practice, would you cheer him on if he tried to change his contract so he could make more?
I don't think so.

 

[MstaKing10]

The current pandemic situation is unusual but the associate signed a contract with a guaranteed salary with a bonus. He has a ceiling to his earnings for the very purpose of getting his contractually agreed upon salary. It's a risk averse decision that most new doctors take.

If he outperformed his contract this year and collected a huge amount for the practice, would you cheer him on if he tried to change his contract so he could make more?
I don't think so.

Fair enough. But clearly he will not (nor will any partner) outperform this year. What good is a guaranteed salary if the practice goes bankrupt? Or to get said salary the practice has to furlough or fire a large majority of their staff etc. It’s a limited pie and everyone wants their piece. How good will it feel to know you took home your “contracted salary” thanks to the firing of staff and risking the practices finances? A practice which by the way gave you an opportunity and who’s infrastructure and reputation you used to establish yourself?

 

[Justice4all]

If he is on track for partnership. Could you offer him a partnership in lieu for the paycut?

 

[dantt]

If he is on track for partnership. Could you offer him a partnership in lieu for the paycut?

I wonder whether those practices who's valuation go down will honor the same valuation formulas as pre COVID when offering partnership.

 

[TheLesPaul]

Fair enough. But clearly he will not (nor will any partner) outperform this year. What good is a guaranteed salary if the practice goes bankrupt? Or to get said salary the practice has to furlough or fire a large majority of their staff etc. It’s a limited pie and everyone wants their piece. How good will it feel to know you took home your “contracted salary” thanks to the firing of staff and risking the practices finances? A practice which by the way gave you an opportunity and who’s infrastructure and reputation you used to establish yourself?

1) Most employees can be furloughed (make more with the CARES act than their salary was initially) and are covered for 26 weeks.

2) Partners should be 0 income at this time given they are essentially eat what you kill.

3) I think most reasonable associates would be okay accepting a temporary pay cut, but that pay cut should be paid back or the buy-in should be correspondingly reduced. All the good will in the world will not feed your family/pay for health insurance and unfortunately this is the world we live in. Trust no one. Ophthalmologists in particular have been known to be scummy.

 

[anonperson]

Fair enough. But clearly he will not (nor will any partner) outperform this year. What good is a guaranteed salary if the practice goes bankrupt? Or to get said salary the practice has to furlough or fire a large majority of their staff etc. It’s a limited pie and everyone wants their piece. How good will it feel to know you took home your “contracted salary” thanks to the firing of staff and risking the practices finances? A practice which by the way gave you an opportunity and who’s infrastructure and reputation you used to establish yourself?

True, he won't outperform his contract now but that's the point of the guarantee.

From the original post, the practice is still making money (partners have decreased by 40%), the partners are just unwilling to take more of a pay cut. They want to shift that burden on their new associate and have him take one for the team.

The partners enjoy the riches during good times and need to bear most of the brunt during the bad. That's the whole point.

They should either decrease his buy in or ask him for a salary deferral with repayment at a future date. That would be the honorable thing to do.

 

[MstaKing10]

1) Most employees can be furloughed (make more with the CARES act than their salary was initially) and are covered for 26 weeks.

2) Partners should be 0 income at this time given they are essentially eat what you kill.

3) I think most reasonable associates would be okay accepting a temporary pay cut, but that pay cut should be paid back or the buy-in should be correspondingly reduced. All the good will in the world will not feed your family/pay for health insurance and unfortunately this is the world we live in. Trust no one. Ophthalmologists in particular have been known to be scummy.

1. It’s 39 weeks and depending on your state, the benefit may or may not be what you made as an employee. Know plenty of practices that have applied but none that have received the loan yet. It’s kind of a mess.

2. this is true if that’s the way your practice is set up. There are non eat what you kill practices such ours where this would not apply.

3. Agree with all points. If this thing turns around (which we all hope it does quickly) and he does well q3-q4 then pay the man. And give a bonus, reduce buy in, or shorten partnership track.

 

[dantt]

Would it be reasonable to ask the associate to also cancel their 90 day termination notice? I can understand a salary reduction but asking for waiver of the termination notice is a big red flag.

 

[anonperson]

Would it be reasonable to ask the associate to also cancel their 90 day termination notice? I can understand a salary reduction but asking for waiver of the termination notice is a big red flag.

That just means they want to fire the associate and not pay 3 months worth of salary. Why else would they ask?

That's nearly $70k the associate would be giving up. Would be dumb of the associate to cancel that clause in this economy unless they had another job lined up and were itching to go to.

 

[DOCnAbox]

Our practice, like many right now, is in this situation. Lots more details than what I’ll share below, but the summary is this:

I am one of 7 partners, and we hired a new MD in summer 2019 on a one year associate contract. The plan was to offer a nice salary ($22,500 monthly), offer partnership after one year (as we have done historically), and offer a bonus at the end of the year based on production above salary.

The associate started in October and hit the ground running, easily making his salary in Q4 2019 plus a little, setting himself up for a likely bonus at the end of the contract year. Then COVID-19 hit, and he saw about 10-20 patients per week over the last 3 weeks. All the partners dropped our monthly salary to 40% of normal, and we are doing our best to keep staff paid and overhead paid in general.

The problem is the associate thinks he should not take a pay cut “because it’s in my contract“. Our managing partner talked to this doc and explained our reasoning, i.e., everyone is taking a huge pay cut right now, but the associate won’t budge. In his contract, we can terminate without cause with 90 days notice, thus we are left with a decision to cut him or try to continue to talk some sense into him. Although he has been easy to get along with so far, many of us partners are now thinking, “do we want this guy as a partner if he is like this as an associate? He doesn’t seem like much of a team player.”

I guess my message is this: if you are employed right now, be a team player. I’m not saying roll over and let people take advantage of you, but please consider what the owners/partners are dealing with right now. This situation isn’t good for anybody, but this too shall pass.

Interesting that your one year associate flat out said no. I felt a moral obligation to take a cut in salary as most of my staff was furloughed and my boss is taking no salary. 50% was hard to swallow and we agreed to 60 day contract amendment and will revisit the subject in May. The 50% cut is minimum and I could possibly see more but I doubt it, given no surgery and amount of patients seen. I am wondering if it would be in my best interest to include a clause regarding my buy-in next year and if adding a clause to the contract that my "goodwill" will take into account the salary I lost during the pandemic. I'm not sure if I am being fair or overly aggressive with this proposition. I think its pretty fair given that "goodwill" is kinda silly with a small practice.

I see both sides of yalls argument... Ideally, the associate would be a team player and this will likely reflect poorly on him with the decision comes to offer him his partnership agreement. When we sign a contract people do silly things like buy houses and cars they shouldn't because they know the money is guaranteed. Others, like me, live the frugal life but put themselves through school and have loans that feel like an anchor that is drowning you so I get needing the money to help pay off those loans (private loan interest never sleeps). Personally I would rather take a temporary pay cut to keep the peach with my practice and for moral reasons. I will have to stomach the forbearance of my loans and the interest shall accumulate. Oh well...

 

[CECFellow2018]

Interesting convo.

As an owner for 3 months; I've not reaped the benefits of ownership and didn't expect until I pay the bank 7 figures back.
Regarding paying the associate the guarantee...legally it makes sense.
What confuses me as the owner; what good does it do to anyone if I fulfill guarantees and there is no clinic and I go bankrupt?
Basically I get the privilege of going bankrupt at 32 before I even got started because a pandemic wiped out 95 % of my revenue AND I guaranteed a salary via a contract.

I just don't think any particular situation is straightforward and each situation is very custom.

When we make contracts with the associates it's under the assumption that the business makes money; and a black swan event didn't stop revenue for 2-3 months all at once. Again, I understand the legal obligation of the contract.

 

[mjohnsonets]

Just curious. With all the talks of contracts and how to handle this, will those of you who are practice owners/partners ask your attorneys to add language to future contracts for a situation like this?

Hopefully this is a once in a life time type thing so I'm curious if it's something that will make it's way into contracts being that's its impact was so large.

 

[dantt]

Just curious. With all the talks of contracts and how to handle this, will those of you who are practice owners/partners ask your attorneys to add language to future contracts for a situation like this?

Hopefully this is a once in a life time type thing so I'm curious if it's something that will make it's way into contracts being that's its impact was so large.

I've heard of many contracts now including Force Majeure clauses. While these clauses have a tendency to be overly broad, I think it will be important, as in all contracts, for these clauses to be as clear and specific as possible. It is to nobody's benefit to require litigation to resolve issues that come up.

 

[dantt]

Interesting convo.

As an owner for 3 months; I've not reaped the benefits of ownership and didn't expect until I pay the bank 7 figures back.
Regarding paying the associate the guarantee...legally it makes sense.
What confuses me as the owner; what good does it do to anyone if I fulfill guarantees and there is no clinic and I go bankrupt?
Basically I get the privilege of going bankrupt at 32 before I even got started because a pandemic wiped out 95 % of my revenue AND I guaranteed a salary via a contract.

I just don't think any particular situation is straightforward and each situation is very custom.

When we make contracts with the associates it's under the assumption that the business makes money; and a black swan event didn't stop revenue for 2-3 months all at once. Again, I understand the legal obligation of the contract.

When you buy a business, you also buy the obligations. I agree; I don't think any particular situation is straight forward. Let's not forget that terminating a contract if a negotiated settlement is not possible is not a breach of contract and the ethics of that are very different. I would hope we all follow to the extent possible the golden rule of "do unto others as you would have them do unto you."

 

[LightBox]

Just fire the entitled associate. Dont need to put up with his inflexibility. Life is short -- be partners with people you want to be with. He also doesn't seem to understand how his practice is to survive by not entertaining alternatives. Aka lack of business sense.

 

[docdoc2012]

Can you elaborate on an inability to negotiate a settlement not being a breach of contract?

When you buy a business, you also buy the obligations. I agree; I don't think any particular situation is straight forward. Let's not forget that terminating a contract if a negotiated settlement is not possible is not a breach of contract and the ethics of that are very different. I would hope we all follow to the extent possible the golden rule of "do unto others as you would have them do unto you."

 

[anonperson]

Interesting convo.

As an owner for 3 months; I've not reaped the benefits of ownership and didn't expect until I pay the bank 7 figures back.
Regarding paying the associate the guarantee...legally it makes sense.
What confuses me as the owner; what good does it do to anyone if I fulfill guarantees and there is no clinic and I go bankrupt?
Basically I get the privilege of going bankrupt at 32 before I even got started because a pandemic wiped out 95 % of my revenue AND I guaranteed a salary via a contract.

I just don't think any particular situation is straightforward and each situation is very custom.

When we make contracts with the associates it's under the assumption that the business makes money; and a black swan event didn't stop revenue for 2-3 months all at once. Again, I understand the legal obligation of the contract.

Each situation is different. The original post that prompted this indicated that the partners took a 40% paycut and it appears now want to make the associate take a paycut and amend the contract. They obviously can afford to take a larger paycut but are refusing for whatever reason.

You don't have to fulfill the contract. Break it and see if litigation happens. Not an honorable way to function but happens on a regular basis in real life.

Regarding the risk of bankruptcy, that is intrinsic to any business. Being a medical practice does not make one immune to this reality. Risk vs reward.

I think the main issue is that the the poster indicated the associate was being difficult by going with the terms of the contract and refused to budge. Did they ask him to take a pay cut or defer salary for a bit? Did they offer a decrease in his buy in?

If you hired a new associate to a base salary and they significantly outperform it and the practice collects a lot off their work, would you even entertain them trying to renegotiate their contract in the middle so they could make more money? Or would you tell them tough luck, you signed a contract.

Some owners want it both ways. When times are good, keep all of the reward. When times are bad, share the pain.

I ran into a similar situation as a new grad. Joined a practice as an emoloyee. The owner was a sole physician. Eventually the practice started to fall apart and other physicians start to leave. Owner comes to me and states he wants me to take a paycut and take more call or else he would go out of business. I declined. He got angry but eventually went out of business.

 

[clayito]

To clarify, the partners, including me, took a 60% pay cut (I said “40% of normal [pay]” in my original post).

Our practice is very generous - when I became partner 5 years ago, the owners actually did pay me a larger bonus than was agreed to in the contract because I greatly outperformed their projections. We did the same thing with the associate/incoming partner one year after me, who also outperformed projections.

I completely agree that it is our associate’s legal/contractual right to take full salary, but I argue that in this particular worldwide, unforeseen, practice and life-altering pandemic, it is not the ethical route to take. Everyone is affected by this, so saying, “I know you and all our staff are taking a hit, but I want all my money because it’s my legal right” doesn’t fly with me.

This associate can take all his money for 90 days, but it’s hit-the-road-jack after that, and good luck finding another job in your hometown (the associate grew up and still has family in our practice location & there are no ophtho jobs available for a 250+ mile radius) in this current job and economic environment.

If we want to play the legal game and argument, the associate’s last day is 90 days from now. The legal/contract argument goes both ways. Not the way I want it to end, but if the associate is not willing to budge, it seems like that’s the way our partnership will vote.

Good discussion and more than I anticipated. Thanks to everyone for his/her thoughts.

 

[dantt]

Can you elaborate on an inability to negotiate a settlement not being a breach of contract?

Terminating an employee and telling them their last day is 90 days because they aren't willing to decrease their salary or whatever is not a breach of contract. This would fall under no cause termination in most contracts and is a normal part of business.

A breach of contract is when you don't follow the terms of the contract as promised. This can include the employee taking off without giving proper notice, moonlighting in a competing practice, practicing within the area covered by a restricted covenant, etc. From the employer side, this means terminating the employee without cause without proper notice. These are what most would consider unethical business practices (though probably occur all the time as a normal part of businesses (think Trump)) and are frequent causes for litigation.

 

[MstaKing10]

As I see it, associate wants to stand their ground and draw a line in the sand yet they have no leverage. It makes no sense. As others have replied, fulfill the terms of the contract and dismiss the associate. In three months when things settle down there will be plenty of hungry and more flexible doctors to choose from to hire.

 

[anonperson]

To clarify, the partners, including me, took a 60% pay cut (I said “40% of normal [pay]” in my original post).

Our practice is very generous - when I became partner 5 years ago, the owners actually did pay me a larger bonus than was agreed to in the contract because I greatly outperformed their projections. We did the same thing with the associate/incoming partner one year after me, who also outperformed projections.

I completely agree that it is our associate’s legal/contractual right to take full salary, but I argue that in this particular worldwide, unforeseen, practice and life-altering pandemic, it is not the ethical route to take. Everyone is affected by this, so saying, “I know you and all our staff are taking a hit, but I want all my money because it’s my legal right” doesn’t fly with me.

This associate can take all his money for 90 days, but it’s hit-the-road-jack after that, and good luck finding another job in your hometown (the associate grew up and still has family in our practice location & there are no ophtho jobs available for a 250+ mile radius) in this current job and economic environment.

If we want to play the legal game and argument, the associate’s last day is 90 days from now. The legal/contract argument goes both ways. Not the way I want it to end, but if the associate is not willing to budge, it seems like that’s the way our partnership will vote.

Good discussion and more than I anticipated. Thanks to everyone for his/her thoughts.

Thank you for clarification. My fault for misreading.

Looks like the group has all the leverage.

 

[Gospartansgo]

To clarify, the partners, including me, took a 60% pay cut (I said “40% of normal [pay]” in my original post).

Our practice is very generous - when I became partner 5 years ago, the owners actually did pay me a larger bonus than was agreed to in the contract because I greatly outperformed their projections. We did the same thing with the associate/incoming partner one year after me, who also outperformed projections.

I completely agree that it is our associate’s legal/contractual right to take full salary, but I argue that in this particular worldwide, unforeseen, practice and life-altering pandemic, it is not the ethical route to take. Everyone is affected by this, so saying, “I know you and all our staff are taking a hit, but I want all my money because it’s my legal right” doesn’t fly with me.

This associate can take all his money for 90 days, but it’s hit-the-road-jack after that, and good luck finding another job in your hometown (the associate grew up and still has family in our practice location & there are no ophtho jobs available for a 250+ mile radius) in this current job and economic environment.

If we want to play the legal game and argument, the associate’s last day is 90 days from now. The legal/contract argument goes both ways. Not the way I want it to end, but if the associate is not willing to budge, it seems like that’s the way our partnership will vote.

Good discussion and more than I anticipated. Thanks to everyone for his/her thoughts.

Interesting discussion. Both are legitimate arguments. I think a temporary reduction in monthly salary is reasonable, but there are many options to make this a fair deal for both sides (if you care to keep the associate in the future). Reducing buy-in or paying the difference in lost salary at the end of the year (or some specified time) as a bonus as mentioned above are both good options. Simply asking him to amend the contract after you stood to make money off of his work this year, then asking to shift the burden from you to him when things aren’t working out is not fair and the reason contracts are legally binding. You also have to consider where the partners are financially in relation to the new associate. The new associate likely has minimal savings and is likely strapped with significant debt that continues to build interest if privately refinanced. The other partners are presumably in a much better position to temporarily weather the storm. I wouldn’t let a great new hire with great potential (not saying he is or is not) go because the other partners decided not to honor the contract you all signed.

 

[Gospartansgo]

Thank you for clarification. My fault for misreading.

Looks like the group has all the leverage.

Also depends on the specialty. What subspecialty or comprehensive and what region in the U.S?

 

[backrow]

Getting to Yes by Roger Fisher & William Ury

During the time you have I’d encourage the OP (and anyone) to read/listen to this book as it may provide some guidance as to how to approach this situation.

Maybe the discussion has already happened and it won’t help, but I have a feeling there is something that is unknown to both parties that is preventing a successful resolution to this issue. Maybe the associate bought a new house, has no savings and therefore any paycut would cause them to not be able to pay their mortgage. Maybe the associate doesn’t understand the gravity of the economic situation to the practice since they likely aren’t yet privy to all the financial statements of the practice. Maybe they plan on leaving anyway.

Who knows, but I think there are likely areas that a principled negotiation could help.


Sent from my iPhone using SDN

 

[Etorphine]

As I see it, associate wants to stand their ground and draw a line in the sand yet they have no leverage. It makes no sense. As others have replied, fulfill the terms of the contract and dismiss the associate. In three months when things settle down there will be plenty of hungry and more flexible doctors to choose from to hire.

not to be morbid, but statistically, this virus is going to come through and kill off a lot of predominantly older folk, docs included. there's already a large demand for new MDs and demand will only get larger in months to come when elective surgery reopens. may not find all those "hungry and more flexible" doctors...they might not even be alive anymore. Losing 1-2% of our understaffed workforce (who is already quite aged) is a real concern. even if the virus doesn't infect them, it could push a lot of older docs to retire earlier than previously anticipated..

 

[bronx43]

not to be morbid, but statistically, this virus is going to come through and kill off a lot of predominantly older folk, docs included. there's already a large demand for new MDs and demand will only get larger in months to come when elective surgery reopens. may not find all those "hungry and more flexible" doctors...they might not even be alive anymore. Losing 1-2% of our understaffed workforce (who is already quite aged) is a real concern. even if the virus doesn't infect them, it could push a lot of older docs to retire earlier than previously anticipated..

Not sure how this makes sense. You're saying that COVID is going to kill a significant portion of older folk (unclear how true this even is from a population standpoint), but then you don't take that same assumption into consideration when you adjust for the workforce. If you lose 4-5% of your elderly population and lose 1-2% of your docs, that's a net decrease in volume per doc.

This isn't even taking into consideration what kind of scenario would need to happen if COVID were able to or allowed to (from policy standpoint) take out enough of the population to make a difference on the macro level. In such a scenario, psychology would be affected so much so that a significant percentage of the elderly would not be willing to even leave their house.

One also cannot assume that docs are going to go into retirement. If anything, the coming depression will not allow people to retire given the economic uncertainty.

 

[medphysik2015]

Interesting thread, I see this argument from all points of view. The solutions to the problems raised will no doubt be dependent on each particular situation. Not sure anyone is really immune to the economic havoc at this point, and government efforts will likely be too little and too late.

Below is an interesting article explaining why millennials are now the lost generation given lost earnings from two recessions and poor job prospects. I wonder how this will specifically affect us, millennial doctors. Only time will tell. God help us all during these trying times, hopefully, this will all be temporary.

Millennials Don’t Stand a Chance

They’re facing a second once-in-a-lifetime downturn at a crucial moment.

www.theatlantic.com

 

[Etorphine]

Not sure how this makes sense. You're saying that COVID is going to kill a significant portion of older folk (unclear how true this even is from a population standpoint), but then you don't take that same assumption into consideration when you adjust for the workforce. If you lose 4-5% of your elderly population and lose 1-2% of your docs, that's a net decrease in volume per doc.

This isn't even taking into consideration what kind of scenario would need to happen if COVID were able to or allowed to (from policy standpoint) take out enough of the population to make a difference on the macro level. In such a scenario, psychology would be affected so much so that a significant percentage of the elderly would not be willing to even leave their house.

One also cannot assume that docs are going to go into retirement. If anything, the coming depression will not allow people to retire given the economic uncertainty.

No one can predict the true #'s at this point in time, but what I can tell you is I've already seen loss of older docs in my community that have no intention of returning to clinical medicine. Your're saying that a loss of 1-2% of docs would apply evenly across the workforce and be in line with loss of general population, but I think it would disproportionally affect our old and gray haired work force. At the end of the day it isn't a matter of infection or death but psychology. Especially when realistically this could go on for 3 yrs before a vaccine is made (having a reliable vaccine in 1 yr is a pipe dream IMO).

I also think the average 65 year old ophthalmologist is sitting on larger piles of cash or liquefiable equity than the average 65 year old, and it would not be out of the question just to retire early. Hell I would.