CONTRACTS

A contract is a legally enforceable agreement involving the mutual promises of two or more parties. Most states require that some contracts (e.g. real estate contracts) be in writing to be enforceable. As a rule, all contracts should be in writing to record the true understanding among or between the parties. People hear what they want to hear and understand what they want to believe. Their perception of an agreement may be entirely different from someone else’s. Oral or verbal contracts are usually enforceable. The problem is to define what either party truly said. Written contracts avoid this problem. A contract does not need to be written by a lawyer to be legally binding, but a person should be careful if they try to negotiate and enter a contract without competent legal advice. They can be bound to a bad contract as easily as a good one.

A contract states the rights and responsibilities of the parties. It has five principal elements:

• Offer

  An offer is a specific promise to do something in exchange for the other party doing something in return. For example, the buyer will promise to pay the seller $300 000 for the assets of the seller’s dental practice if the seller promises to sell them to the buyer.

• Acceptance

  The acceptance says that there is an agreement to the terms and conditions of the offer. In the preceding example, the seller agrees to sell the buyer the seller’s practice assets according to the terms of the buyer’s offer.

• Consideration

  Consideration is the value exchanged between the parties to perform their mutual promises. For example, the buyer and seller exchange $300 000 as consideration (or value) for the assets.

• Capacity of the parties

  All parties must have the mental and legal capacity to enter into a contract. Someone who is under age or mentally impaired cannot enter contracts without their guardian’s consent.

• Legality of purpose

  A contract must have a legal purpose to be enforceable. For example, an employment contract made with an unlicensed person in a regulated profession (dentistry) would be void because one person cannot legally employ another with no license.

Some contracts may be assigned, meaning one party has the right to transfer the promise to a third party not part of the original agreement. For example, a person might assign the lease for office space to another person. Most personal contracts cannot be assigned.

Common contracts in dental practice include the following:

• Office lease
• Employment (associate) agreement
• Insurance (managed care) plan participation contracts
• Promissory note
• Partnership agreement
• Buy–sell agreement
• Bill of sale
• Contract for practice purchase.

As stated previously, a contract is a promise by two or more parties to do something. If one party fails to fulfill the contractual obligations, a breach of the contract has occurred. The non‐breaching party can attempt to receive monetary damages to compensate for their loss because the contract was not fulfilled. When someone breaches a contract, there are four common alternatives for reaching a remedy: negotiation, arbitration, mediation, or litigation. Some contracts state how any disputes will be handled.

TORTS

A tort is a civil wrong, other than a breach of a contract, committed against a person or their property for which the law gives the right to recover damages. Torts differ from crimes, which are wrongs against society (Box 14.2). Some acts, such as assault, may be both a wrong against a person (a tort) and a wrong against society (a crime). Intentional torts involve deliberate actions that cause injury. Unintentional torts are not deliberate.

Negligence is a tort that involves an injury that results from the failure to use “reasonable care.” Negligence is the most commonly discussed tort in dentistry. The four elements needed to prove negligence are given here. (Professional negligence is a special type of negligence discussed later in the chapter.) One critical element of this tort is duty. Without a duty (or obligation or relationship) to another person, one does not owe that person reasonable care. The duty arises from a person’s conduct or activity.

Someone who is doing something has a duty to use reasonable care so as not to injure others. Whether a person is driving a car or practicing dentistry, they have a duty not to injure others through unreasonable conduct. Usually, people do not have a duty to avoid injury by non‐conduct. A member of the public has no obligation to warn someone else of a possible problem, even if they have seen the problem. (There may be a moral call to warn the other but no legal requirement.) A sunbather has no legal obligation to warn swimmers of a shark in the area. However, the situation changes if there is a special relationship between the parties. A business that rents surfboards has a special relationship with the renter and probably does have a legal responsibility to warn of sharks in the area. The business is potentially liable if it negligently rents the board without proper warning. Consequently, many professional office buildings are justifiably concerned with security and other protection measures.

Negligence is the failure to behave as a reasonable and prudent person in a similar situation would behave (Box 14.3). A person has a duty not only to recognize a potential problem, but also to do something to prevent the problem (a duty to act). This is not an absolute differentiation. Instead, the individual’s actions (or inactions) must be compared to a norm that changes over time and for which different people may have different values. For example, assume a person has a dental office in a northern state with steps leading to the front door. If it snows, most people would say that a reasonable and prudent person would sweep the snow from the steps and apply salt to melt any remaining ice to prevent people from slipping and injuring themselves. If the dentist fails to sweep the snow, they have probably not acted as a reasonable and prudent person would have acted in a similar situation. If a patient or anyone else who has a reason for being there slips on the ice or snow and gets injured, they would probably sue the dentist for damages (and win), claiming that the dentist was negligent in not sweeping the snow and ice from the steps. This example is obvious. The problem comes when juries are asked to decide on cases in which it is not clear whether or not a prudent person would have recognized a danger in a similar circumstance and acted to prevent the accident. Lightning strikes a golfer. Should the golf course superintendent have warned the golfers (by sirens or other devices) that there is lightning in the area and to take cover, or should the golfers have known, without warning, to take cover during a thunderstorm? A doting elderly patient trips on the door threshold while entering a dental office and sustains injuries. Was the threshold loose or in another way hazardous or a potential problem? If so, would a reasonable and prudent person have previously fixed the threshold? Did the person’s impaired condition contribute to the accident? Obviously, juries need to make judgments concerning both the degree of hazard presented by a problem and what is a reasonable and prudent response to a potentially hazardous situation.

There are several instances in which the law further defines negligence. Contributory negligence says that the failure to use reasonable care by the plaintiff (or injured party) in a negligence suit contributed to the injury. In the past, cases in which the plaintiff’s own actions contributed to the injury “in any degree, however slight,” were dismissed. The trend today, however, is to move from this strict interpretation toward one that compares how much of the fault is the plaintiff’s and how much is the defendant’s. Juries award damages based on the proportionality found. Comparative negligence then allocates the plaintiff’s and defendant’s fault (and damages).

Vicarious liability is imputed liability. The negligence of one person makes another liable. A common example is the legal doctrine of respondeat superior (“let the master reply”). This doctrine assumes that if an employee is liable for acts committed while performing their job, then the employer (or business owner) is also liable. This results from the principal–agent relationship, which says that the employee is advancing the employer’s interests. Once the employee is found negligent, the owner is strictly liable. Warning a staff member to be careful when driving cases to the lab does not prevent the owner from being vicariously liable when the employee runs a red light and has an accident while doing so. Or consider a case in which a hygienist drops an instrument in a patient’s eye, causing significant and permanent visual damage to the patient. The hygienist is personally liable for professional negligence. Similarly, the dentist is personally negligent for failing to supervise the hygienist adequately, and the employer is liable to the full extent of its assets under the doctrine of respondeat superior. As a rule, the corporate structure does not protect a person from professional negligence caused by that person or one of their employees. The limited liability purportedly given to shareholders of professional service corporations is illusory. Any liability protection is for business liability only, not professional liability.

Absolute or strict liability assesses negligence without fault. Juries award damages, although there was nothing wrong with what the liable person was doing. This is the one case given in which negligence does not need to exist for there to be a liability. Besides the one in the preceding paragraph, a common example is in workers’ compensation cases. The juries assume that the owner is liable, although the employer may not have been negligent. The worker then collects compensation from the business owner’s workers’ compensation insurance carrier. In these cases, this is the sole remedy: the worker cannot sue the owner for any damages above those compensated by the insurance carrier, even if the owner was negligent or had an unsafe workplace or work practices. This is the trade‐off for requiring employers to carry state‐approved workers’ compensation insurance.

An attractive nuisance is an event or item that might attract and injure someone, especially a child. The owner or occupier of the property must use due care to discover children on the property and then warn them or protect them from injury or death. A swimming pool in a crowded neighborhood will attract many children who live nearby. Besides using reasonable protection methods, such as non‐climbable fences, the owner should find children and warn them against the dangers of being around an unsupervised pool. Pets, especially wild animals, can attract children, with dangerous consequences.

Liability is the legal responsibility to make good a loss or damage that has occurred because of a person’s negligent actions or inactions. It is important to note that, except in strict liability cases, liability occurs only if negligence is proven. If someone is found negligent and therefore liable, the courts will require that person to compensate the injured party for repairing the injuries suffered. (To indemnify is to make whole or make good for a loss.) These compensatory damages include the following general categories:

• Past and future medical expenses.
• Past and future economic loss, including loss of property and loss of earning power.
• Past and future pain and suffering.

Determining the actual amount awarded for each category creates significant problems and many horror stories from those who love to bash the legal system. Often juries decide by sympathy as much as true financial loss.

Courts and juries may also require punitive damages from liable individuals. They levy these punitive damages to punish the defendant for grossly negligent or “willful and wanton” behavior. A key element of punitive damages is deciding the defendant’s motive. If the jury determines that the motives were malicious or intentionally damaging, then punishment is in order. The amount and appropriateness of punitive damages are presently being debated in US courts and Congress.

WORKERS’ COMPENSATION ACTS

The workers’ compensation system was designed to provide a way to pay workers or their families if the worker is accidentally injured, killed, or contracted an occupational disease because of employment. Two simple tests determine whether an employer must pay workers’ compensation:

• Was the injury accidental? Although the laws apply only to accidentally injured workers, proving that employers acted intentionally to injure a worker is difficult. Most states have an exclusive remedy rule, which states that these compensation laws are the only remedy for a worker against an owner for injuries on the job. They may not sue the owner separately for negligence in the workplace.
• Was the injury during employment? The courts have broadly interpreted the meaning of the term “in the course of employment.” Generally, if the injury was in any way related to work, it might be a workers’ compensation issue. An employee might have a heart attack or chronic fatigue syndrome, claiming the cause was a stressful job. Because the states are involved heavily in administering the workers’ compensation system, there is a wide variation in qualifications and awards nationally.

The effect of the Workers’ Compensation Act on dental practice is seen when an employee is injured while on the job. These injuries may be physical, such as a cut or an eye injury; they may be infectious, such as contracting hepatitis through an inadvertent needlestick; or they may be mental or emotional. (Each state administers its own workers’ compensation system and has different definitions of qualification for these injuries.) The injured worker will generally receive medical care for the injury, compensation for lost wages while recuperating, and often disability payments if the injury causes long‐term disability. Because this program is “insurance,” a person pays for these benefits indirectly through insurance premiums.

WAGE AND HOUR LAWS

The Fair Labor Standards Act (FLSA) is a federal law that is administered by the states. It defines the rules regarding wages and hours in the workplace. Because each state administers the laws, there is some variation in their interpretation. However, these all have some provisions for the following issues.

The FLSA has significant effects on dental practice through minimum wages, overtime rules, and exempt employee status. Dentists should keep excellent time records for accurate wage determination and to guard against claims by disgruntled present or former employees.

• Minimum wage laws

  Minimum wage laws define the minimum hourly rate an employer may pay an employee. Congress periodically changes this base rate. Although technically this applies only to businesses in “interstate commerce,” nearly all firms have a customer or supplier in another state and therefore fall under these rules. If Congress increases the minimum wage rate, firms often raise the wage rates of all employees as they try to maintain pay differences among classes of jobs and employees. Many states and municipalities have minimum wage laws that dictate a minimum wage higher than the federal minimum.

• Overtime laws

  Overtime laws describe how the employer must treat overtime work. Overtime is considered all work more than 40 hours per week. Note that this is not based on 8 hours per day or 80 hours per two‐week pay period, but on a 40‐hour workweek. (A few states define overtime as more than 8 hours of work per day.) If an employee works more than 40 hours in a workweek, the law requires the employer to pay the employee’s base pay plus a 50% premium (i.e. “time and a half”) for all hours worked beyond the basic 40‐hour workweek. The employer may not offer or require compensatory time the following week to make up for the overtime worked.

• Exemption from overtime laws

  Certain employees may be exempt from overtime laws. They are generally professional or managerial people. Owners do not have to pay these exempt employees overtime, which is why entry‐level managers at the local fast‐food restaurant may work 60‐ or 80‐hour workweeks. Few dental office employees qualify as “exempt” employees. Associate dentists are professional personnel and therefore exempt. True office managers (who supervise several people and have hiring authority) probably would qualify as exempt employees. Dental assistants, hygienists, and receptionists are not exempt from overtime laws in most states. If the employer pays them a “salary,” the employer must still pay overtime if the employee works more than 40 hours a week.

• Child labor laws

  Child labor laws define how many hours a child (younger than 18 years of age) can work and the types of jobs they may hold. As a rule, children may not work in any physically demanding or dangerous occupation. The hours for which they may work are also limited. The number of hours allowed is often based on whether or not schools are in session.

UNEMPLOYMENT COMPENSATION

The government requires that employers carry unemployment compensation insurance on all their employees. This joint federal–state program is composed of the Federal Unemployment Tax Act (FUTA) and a State Unemployment Tax Act (SUTA). Although this is technically a tax, from an employer’s perspective unemployment compensation behaves more like insurance. The more claims former employees collect on an employer’s “account,” the higher the premium the employer will be charged.

Unemployment compensation is designed to help people who have lost their job through no fault of their own. They must actively look for another job while they are collecting unemployment compensation, and the government limits the length of time for which a person can collect unemployment. The laws usually disqualify an employee from collecting any unemployment compensation if any of the following three events happen:

• The employee refuses other similar work.
• The employee was discharged for proper cause.
• The employee quit employment voluntarily.

If a former employee files for unemployment compensation listing an employer as a former employer, the employer will receive information regarding the claim. If an employer wants to dispute the claim, they should initially complete the paperwork without delay. A hearing may be held, where the employer, former employee, and a hearing officer sit together. The hearing officer may ask for records (such as timesheets) or other documentation from the employer. After hearing from both sides, the hearing officer makes a decision. Without proper documentation, an employer does not stand a chance of winning. Even with proper documentation, hearing officers often lean toward the side of the former employee. The moral of this story is that an employer should always keep excellent employee records.

OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION

The federal government requires that employers provide a safe workplace for their employees. The way they enforce this requirement is through OSHA. Congress established OSHA under then‐President Richard Nixon. Congress has expanded it from high‐risk industries, such as construction and mining, to incorporate nearly all employment situations, including dental offices and other healthcare settings. OSHA works closely with other governmental organizations, such as the Centers for Disease Control and Prevention (CDC), when it establishes regulations that pertain to its particular area of expertise.

OSHA is concerned only with worker safety. It does not have authority over patient safety in the dental office. If a dentist practices as a corporation, the dentist is an employee of the corporation (although also an owner), and then OSHA regulations apply to the dentist in the workplace. If a dentist is a proprietor or a partner owner of a dental practice, OSHA has no regulatory authority over the dentist in the workplace (because they are an owner, not an employee), but the regulations apply to all other office employees regardless of the form of business. However, other regulatory organizations (such as the state board of dentistry) may apply standards (such as the CDC standards) to a healthcare provider.

In the dental office, OSHA is concerned with three general areas:

• Infectious diseases and their spread to workers.
• Hazardous chemicals in the work environment.
• General work conditions, including problems such as fire safety, office ventilation, and ergonomics.

OSHA standards are discussed in more detail in Chapter 28.

AMERICANS WITH DISABILITIES ACT

The Americans with Disabilities Act (known as “the other ADA” in the dental profession) is intended to ensure that disabled people are not discriminated against in the US commercial world. The ADA defines a disability as “a physical or mental impairment that substantially limits one or more major life activities.” The law stipulates that disability includes hearing and visual impairments, paraplegia, epilepsy, past drug use, alcoholism, HIV, and AIDS. The law does not define what “major life activities” are. The ADA has the potential to affect dentistry in several ways.

Businesses may not discriminate against customers or patrons based on any disabling conditions. The provisions of this part of the law apply to all places of “public accommodation,” which includes dental offices. It is, therefore, illegal to treat any person with a disability differently (from a dental standpoint) than a dentist would treat a non‐disabled person. Any new building or major remodeling must be prepared to allow people with disabilities access to the office. If a dentist treats a person with a disability, they must make reasonable accommodations for that person’s treatment and ensure that the disabling condition does not compromise the quality of the care provided. If a person with hearing impairment is a patient, a dentist must ensure that the person understands the treatment options and fully consents to the treatment. This may require the use of written notes, sign language, or a professional signer. (Dentists must bear the cost of this unless they have made other provisions with the patient.)

Businesses must also make reasonable accommodations to protect the rights of individuals with disabilities in all aspects of employment. There is no absolute rule about what makes an accommodation reasonable. It depends on the size of the employer, the cost of any changes, and the impact on others. Possible changes may include restructuring jobs, altering the layout of workstations, modifying equipment, or providing special equipment. Employment aspects include the application process, hiring, wages, benefits, and all other aspects of employment.

Presently, dental practices that employ fewer than 15 people are exempt from two federal statutes: Title VII of the Civil Rights Act of 1964 (which prohibits discrimination based on race, religion, etc.) and the ADA (which prohibits discrimination based on disabling conditions). Most individual dental offices are therefore exempt from the federal legal statute. Whether a dentist chooses to abide by the moral imperative of the federal statute is a personal choice, if the dentist has fewer than 15 employees. Be aware, however, that many states and local governments have similar laws that apply to smaller employers. In addition, many lawyers will attempt to hold a business to the standard despite the number of employees. So, the best strategy is to follow the law, even if the dentist does not think that it applies. A job description and open communication (and documentation) should be used during the interview process.

SOCIAL SECURITY

Social Security provides income when a family’s earnings are reduced or stopped because of disability, death (survivor protection), or retirement. The government requires an employer to participate in the Social Security system by matching contributions to employees’ wages. This is covered in more detail in the Chapter 17.

PENSION PLAN INCENTIVES AND PROTECTION

To participate in most tax‐deferred, tax‐deductible (“qualified”) retirement plans, an employer must include employees in the plan and fund their retirement contribution if eligible. The Employee Retirement Income Security Act (ERISA) has set guidelines for participation and contribution. Because there are so many types of plans and because this area of tax law changes frequently, it is only mentioned here that there are law provisions that affect how a person can structure a retirement plan. Retirement planning is discussed in more depth in Chapter 9.

UNJUST DISMISSAL

In the United States, people generally practice the doctrine of “employment at will,” which states that the employer hires the employee at the employer’s will, and the employee works at their own will. Either can end the relationship at any time (unless a contract states otherwise). (The converse is the fire‐at‐will doctrine, which states that the employer may fire an employee “for good cause, for no cause, or even for cause morally wrong” unless prevented by agreements or contracts.) However, the days when an employer can exercise the fire‐at‐will doctrine and fire an employee without fear of retribution are quickly fading into the history books. Unjust (or unfair) dismissal occurs when an employee is forced to accept employment termination in harsh, unreasonable, or unjust circumstances. Examples of unreasonable firings include firing a person because they are pregnant, because they will soon be vesting in a pension plan, or because of a discriminating factor, such as race, age, or religion. An unfairly dismissed employee may seek reinstatement or compensation from the previous employer through the courts. (Firing issues are dealt with in more detail in Chapter 26.)

An employer might face consequences for firing an employee despite the justness of the firing. The employee may collect unemployment compensation, affecting the employer’s unemployment tax rates. The former employee may attempt to retaliate, through either legal or illegal methods. A former employee with a key to the office can easily cause havoc by disrupting utilities, and disturbing materials, records, or computer files. They may cause problems by calling OSHA, the IRS, the Wage and Hour Cabinet, the board of dentistry, or other regulatory agencies claiming that an employer has acted illegally. Although these organizations all understand employee retaliation, the laws require many of them to investigate all complaints brought to their attention.

There is no single law that regulates the dismissal of employees. But the effect of this concept on the dental office is that an employer should be careful when firing an employee. They should check the date when the employee vests in a pension plan (if any) and be aware of any other potential reason for a former employee to sue (e.g. pregnancy, race, age), claiming that was the reason for the dismissal rather than their job performance. If the employee falls into any of these protected groups, the employer should be sure to have excellent documentation before firing. Otherwise, it may appear, on the face of it, that the employer is firing this employee unjustly (because of the discriminating factor). It would be up to the employer to prove this is not so.

DISCRIMINATION AND THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION

The Equality Employment Opportunity Commission (EEOC) enforces federal laws prohibiting employment discrimination based on an individual’s race, religion, sex, gender, national origin, age, or disability. The EEOC coordinates the enforcement of several different laws related to employment discrimination. These include Title VII of the Civil Rights Act of 1964, the Age Discrimination Employment Act of 1967, Title I of the ADA, and the Equal Pay Act (EPA) of 1963.

Overall, these laws prohibit hiring discrimination, workplace harassment, or firing preferences based on any of the listed discriminating factors. (In this sense, sexual harassment in the workplace is a form of unlawful sex discrimination.) In fact, most of these laws apply only to larger employers (15 or more employees). However, as with the Americans with Disabilities Act, many states and municipalities have similar laws that apply to all employers. Just because a law does not apply, this does not absolve anyone of the moral imperative to treat people fairly and equally, no matter their external characteristics.