Associate Agreements From the Principal’s Perspective


David Rosenthal


February 23, 2017

February 23, 2017

There are many issues to consider when hiring an associate dentist. An associate agreement (Agreement) is the legal contract that details the arrangements between the dentist who owns the practice (Principal) and the associate dentist (Associate) hired to work at the practice. This article is part 1 of 2 which considers some of those issues from the Principal’s perspective. 

A surprising number of Principals do not enter into proper written associate agreements to document this important relationship and they do so at their peril. While a verbal agreement may be legally enforceable, it is not sufficient. A written agreement between the parties is critical to protect the Principal’s interests and deal with the various matters that should be clearly set out in writing. In addition, not having an appropriately written and signed Agreement between the Principal and Associate can be a serious detriment and obstacle when the Principal sells the dental practice.

RelationshipIn almost all situations the Associate works at the Principal’s dental practice as an independent practitioner. Principals and/or Associates can be individual dentists or dentistry professional corporations. This article does not deal with dentistry professional corporations. But there may be many potential tax benefits so it is always worthwhile to contact with your tax advisors to determine whether to use a professional corporation as the Principal.

As an independent practitioner the Associate is operating his or her own separate business and is self employed. The Principal pays the Associate a gross amount and the Associate must then remit from that gross amount the required taxes to Canada Revenue Agency (CRA). The Agreement needs to clearly specify the independent contractor relationship between Principal and Associate.

Very few dentists treat their Associates as employees. Most Agreements specifically state the Associate is not an employee and will personally pay all taxes and satisfy all other governmental requirements. However, simply making that statement in the Agreement is not sufficient. The relationship of Principal and Associate will be determined based on what the actual facts show the relationship to be, not just what the words in the Agreement say.

CRA may audit and assess the Principal on the basis that their Associate was, in fact, an employee. If CRA were successful the Principal could be responsible for the statutory deductions the Principal failed to make as an employer, such as income tax, Canada Pension Plan and Employment Insurance. In addition there could be penalties and interest.

There are several factors that CRA will examine in determining the relationship of Principal and Associate and whether is it an independent contractor or employer/employee relationship.

Control – who controls the patient flow and scheduling, the hours of work, the nature and quality of work and the right to determine staffing needs.

Ownership – who owns and supplies the equipment and instruments required by the Associate and who bears the costs related to their use and maintenance.

Chance of profit/risk of loss – who assumes the financial risk. Is the Associate entitled to his/her full remuneration regardless of the financial health of the practice and whether or not the patients pay for the dental treatment.

Integration – is the Associate acting on behalf of the Principal and connected with the Principal’s dental practice in all aspects.

It may be that some Principal/Associate arrangements are considered as employer/employee relationships. This makes a properly drafted Agreement, which clearly reflects the Associate as an independent contractor, extremely important from the Principal’s perspective and for the Principal’s protection.

The Agreement should detail what the Associate, as an independent practitioner, is responsible to pay for, including licences, memberships, insurance, educational courses, seminars, and other expenses applicable to the Associate.

The Agreement should detail all services and facilities the Principal will provide to the Associate, including the use of the premises, equipment, dental supplies, staff and services. Staff and services might include receptionists, chairside assistants, dental hygienists, management, administrative, bookkeeping and collection services. If special equipment or specific staff is required (such as a designated operatory or designated chairside assistant or hygienist) this should be detailed in the Agreement. Often the Agreement stipulates that the Principal will provide the certain standard equipment and routine dental supplies and it is the Associate’s cost where the Associate requires further specialized items. PA

Part 2 of this article continues in the next volume of The Professional Advisory and will address Associate remuneration, non-competition covenants and termination of the Agreement.

David Rosenthal is a senior lawyer with Spiegel Rosenthal Professional Corporation whose practice is devoted to corporate, commercial and business law, with special emphasis on advising dentists. He can be reached at (416) 865-0736 or e-mail to