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Preparing for partnership: setting the terms of employment (Proceedings)

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Nov 01, 2010

High turnover among veterinary associates is caused principally by the failure of practice owners and employees to properly articulate their respective expectations and negotiate and document the employment relationship. Time and effort invested up front will help avoid mismatched expectations, misunderstandings and separation down the road.

Can the practice even afford another full-time veterinarian? Management consultants estimate that a small animal practice vet needs to produce 3,000-4,000 transactions annually and collect a minimum of $225,000-$300,000 gross income (excluding OTC product sales) to be worth his salary.

I. WHAT IS AN EMPLOYMENT CONTRACT? A contract is a set of bargained for promises between two or more people, where one party promises to do X in exchange for another party's promise to do Y. Courts require that an enforceable promise meet certain conditions. For example, the parties must be of age (no minors), of sound mind, and not under duress; there must be no fraud or mutual mistake over an important aspect of the transaction, and the deal must not be so one-sided as to be "unconscionable."

Consideration. To distinguish binding promises from charity or gifts (you can't sue Santa Claus because he didn't give you enough presents last year), the law requires that the party to whom the promise is made give "consideration" for the promise in the form of a benefit to the promissor and/or detriment to the promisee. Thus, Dr. Newgrad promises to work 50 hours per week in consideration for an annual salary of $58,000 (i.e., a benefit to Newgrad and detriment to Oldguy). Oldguy promises to pay such salary to Newgrad in consideration for Newgrad's labor (benefit to Oldguy and detriment to Newgrad). Consideration exists for each promise which is therefore enforceable.

Avoid Oral Contracts. Oral contracts generally are binding only if their performance lasts less than a year, because the law assumes that the parties' recollections of what was agreed to become unreliable over time, increasing the tendency to remember events in a self-serving way. Few disagreements are less productive than the "you promised X," "I don't remember X but you promised Y" litany. Prevent such wasteful bickering by always insisting on a written contract, regardless of it's term.

II. CONTRACT FORMATION. Legal theory provides that a contract is formed once an offer is accepted. Real life usually is a lot messier.

Offer An offer can be oral or written (e.g., employer advertisement in a professional journal, on a bulletin board or mailed to the applicant). Typically, the prospective employee will ask for clarification and wish to change the terms of the original offer by making a counter-offer. The employer counters such counter-offer with his own counter-counter-offer. This confusing and frustrating process continues until either the parties reach an agreement or, realizing they can't make a deal, go their separate ways.

Acceptance Legally, the contract is formed as soon as the offer is accepted. This can be a trap for an impulsive party who accepts an offer, but who later (like Columbo) asks for "just one more thing." After acceptance, it's too late and the other party can sue for damages if the impulsive party doesn't perform his or her obligations under the originally accepted offer.

Ideally, an accepting party will clearly indicate his acceptance to the offering party, at best by signing an employment agreement or acknowledging acceptance in writing on the offer. More difficult to prove, but still unambiguous is an oral "I accept" or words to that effect.