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Welcome

Legal Aspects Of Optometric Practice

Pamela J. Miller, O.D., F.A.A.O., J.D.Highland, California

Pamela J. Miller, O.D., J.D.

• Became owner: 1974• Staff size: 3• Member: AOA, former

member CA St. Bd. of Optometry, National Academies of Practice in Optometry, staff O.D. San Bernardino Co. Medical Center

• SCCO 1973

Dr. Miller and staff

Mission statement: To provide premium vision care by a warm, caring and supportive

doctor and staff

Legal terms you need to know• Plaintiff• Defendant• Doctrine of informed consent• Duty to warn• Duty to mitigate• Document• The average reasonable person standard

Legal concepts you need to know

• Respondeat superior: Let the master answer• Deep pockets• Joint and severable liability• Res ipsa loquitur: The thing speaks for itself• Rebuttable presumption of negligence:

instrument causing injury was in defendant’s exclusive control and the accident was one which ordinarily does not occur in the absence of negligence

Documentation

• The most important piece of legal advice• Document completely but judiciously• Do not change, erase or alter a writing• Adding to a writing is permissible – sign, date,

state why you are adding to the document (ex. new information, research, addendum, etc.)

Contract law

“A promissory agreement between two or more persons that creates, modifies, or destroys a

legal relation.” “An agreement consisting of a promise or mutual

promises which the law will enforce or the performance of which the law in some way recognizes as a duty.”

Contract basics

• Oral or written• Express or implied• UCC – commerce, goods• Statute of frauds

Contract statute of frauds

• “No action shall be maintained on certain classes of contracts or engagements unless there shall be a note or memorandum thereof in writing signed by the party to be charged or his authorized agent.”

• Personal services, sale of land, etc.

Contract requirements

“Four corners of the document”• Offer• Acceptance (mirror image)• Consideration• Parties with at least limited capacity (duress,

fraud, free will, mental capacity)• Mutuality of terms

It’s as simple asA ActB BreachC ConsequencesD Damages

Damages• Actual• Compensatory

– Unforeseeable: future earnings– Foreseeable: actual expenses,

retraining, lost wages, counseling

• Nominal• Punitive

Contracts you’ll encounter• Real estate - office

Purchase rentalLeaseRentConstruction

• PracticePurchasePartnershipMergerShared overhead

• EmploymentIndependent contractorEmployee

• EquipmentPurchaseLease

• Third party providerPanel member

Employee health care

Always read the fine print!

Pre-nup• Pre-nuptial agreement• Pros and cons• Spousal involvement in business• Purchase/sale of office and assets• Protection from liability• Tax filing – married, filing separately• Keeping it separate vs. co-mingling

Legal entitiesSolo it’s just you, all the way

Partnership joint owners (equal?)

Group 3 or more

Affiliation share overhead; separate (but equal?)

Merger 2 or more practices join

Franchise purchase the right to be part of a larger organization in return forspecific privileges, expense sharing, etc

Hiring: Your responsibilities

• Human resources• Educate• Inform• Follow-up• Oversee• Evaluate and re-evaluate

Stop litigation before it starts• Review your policies• Keep up on the law• Post required notices• Accept no nonsense• Set an example• Treat everyone equally and fairly• Watch your opinions

New hires• Contract• Office policy manual• Verify education,

experience, references• Background check, criminal

or court records• Complete all hiring forms;

copy of right to work verification; federal forms

• Introduce to office, duties

• Continued employment predicated on successful completion of physical and drug test, if applicable

• Provide training• Safety training; passwords,

keys, etc.• Employee has opportunity to

explain or refute information• Learning, not probationary

period

Independent contractor or

associate

Independent contractor• New practice owners often are also

independent contractors (or employees) inother settings to supplement their income

• Clearly defined by the IRS• Not an employee• Responsible for all taxes and contributions• Look to the relationship between the parties

Employee contracts

• Policy vs. contract• What should I include• What should I exclude• How comprehensive should it be• Court interpretation• Burden of proof

Employment at will

• Disclaimer• Termination at any time• With or without cause

Protect interests by

• Confidentiality agreements• Covenant not to solicit patients• Covenant not to solicit employees• Covenant not to compete during employment• Return of property upon leaving the practice• Beware of out-of-state corporations

Confidentiality agreementNon-disclosure agreements

• Designed to protect the employer, seller or partner from disclosure of trade secrets– i.e. May contain trade secret protections

• Separate from non-competition clause• May be severable from a non-compete agreement so

not to violate “right to work”

Confidentiality agreementNon-disclosure agreements cont.

• Covenant not to compete arising from sale of business or partnership dissolution may be valid

• Employers may not force an employee to sign a covenant not to compete or a condition of employment – unfair competition

• Look to geographic area, time, activity, public’s right to receive care

• State court may differ from federal court

Covenants

• Covenant not to compete• Competition agreement

Purpose: To protect practice value and goodwill

Covenant not to compete• Restrictive or a restraint of trade

– Is it reasonable, consistent with public welfare and bargained for pursuant to lawful contact?

• Goal is to prevent patient or record stealing or punish someone who does

• Enforceable if reasonable in light of the facts and circumstances

Covenant not to compete cont.• Cannot restrain trade – cannot be too

restrictive and unfair to the parties involved or public welfare

• Generally not honored in CA – check state law– Reasonable time limit only long enough to enable

former employer or buyer to protect the practice• Part of an employment contract, purchase

agreement, partnership or “pre-existing” relationship

Compete clause(Employees, partners, mergers, associates)

• Shows greater durability and enforceability• Doctor #2 can leave doctor #1, BUT to practice in the

same town, he or she must pay X to #1 • Holds up in court• Must have consideration• Must be reasonable and specific• Designed to mitigate damages

– liquidated damages

Boilerplate language• Confidentiality• Employment at will• Privacy• Electronic media• Harassment• Discrimination• Zero tolerance

Employer

Taxes – 2008• Paid by Employer Employee• FICA – social security 6.20% 6.20%• Medicare 1.45% 1.45%• SDI (CA) 0.08%• Federal schedule• State schedule• SUI 3.4%• ETT 0.10% on 1st $7000

(employer training tax)• Workers’ comp schedule

Hire to fire documentation• Handbooks – policy manual• Handbooks vs. Application• Be understanding of personal

problems• Supervisor Training• Evaluations – written warnings;

document• Communicate, communicate,

communicate• Don’t stress out

• Consistency – praise & suggestions for improvement

• Resignation• Post-Termination• No surprises• No discussion once

termination is necessary – end of day, end of pay; stand and escort to door

• Return keys, change codes

Hire defensively

• Be specific about rules• Be vague about rights

– Progressive discipline policies• Oral warnings• Written warnings• Suspensions• Terminations

Employment application• Authorizations

– Background check– Reference check– Drug & alcohol testing– Certification that all info provided by applicant is true

Successfully enforce policies

– Don’t ignore a situation or conflict– Take action to achieve resolution– Document your actions– Employee should sign all performance reviews & keep a copy– Pyramid any disciplinary measures if

possible

Develop a game plan• Address a complaint or issue immediately• Employee rights• Following through - consistency• Posting• Right of Privacy• Annual review - Do not puff• Review/update office policy manual periodically

Boilerplate language

• Employment at will• “Employees are forbidden from disclosing,

taking, or copying confidential information”

• “Zero tolerance”• Right of privacy• ADA - “reasonable accommodation”

What is sexual harassment or discrimination?

• Unwanted and offensive touching• Objectionable behavior• Unwelcome sexual advances• Requests for sexual favors• Boss has no special right• Hostile environment

Protect yourself• Prompt and effective action to end alleged

harassment after complaint• Employee must make a complaint• If no action is taken to resolve the complaint,

the employee may sue and receive actual damages, court costs, attorney’s fees, and even punitive damages for willful violation

RED YELLOW GREEN

• RED: Not allowed - always unacceptable

• YELLOW: Questionable - Usually unacceptable or inappropriate

• GREEN: Allowed - acceptable

The golden rule

• All employees must be treated with dignity and mutual respect

• By everyone, at all times• You set the example and are responsible

for the whole office

Office illness and injury prevention manual

Leases & purchase agreements

EquipmentReal property

Practice

Equipment lease• Lease purchase – annual tax paid

– $1 buy out or fair market value buy out– May be higher cost; shown as expense– Doesn’t show as an asset or liability

• Outright purchase vs. finance• Write-off value: depreciation per year• Lease without option of purchase

Office lease considerations• Mistake to pay operating expenses based on leased

space rather than on leasable space• Lease rate: rent + operating expenses and how

calculated; increases• Maintenance and upkeep; remodeling• Amount of free rent• Length of time space has been available; %

occupancy; length of current tenant’s leases, lease incentives to current residents

• Any exclusionary businesses (i.e. other optical)

Office lease considerations cont.• In event of fire, loss of use, loss of space/contents;

remodeling, improvements, change of entrances, relocation; hours of business; square footage, parking

• Termination clause – right to sublet• Tax indemnification clause• Ownership change; buy-out clauses and down payments• Insurance specifications• Warranties on premises, equipment, etc.• Included services, signage, hours of operation

Is it better to purchase or own?• Real property

– Purchase outright– Finance– Lease to own

• Equipment– Purchase outright– Finance– Lease to own

• Employees

Practice purchase or sale

• Lump sum is not the best option• Serial sale: interest on sale is paid monthly (with

principal). Tax may be computed on this interest – as a gift tax against the selling doctor unless the interest is already worked into the price

• Structured sale (best option): buyer has option to speed up payments

• Check with your accountant and tax attorney

Own your ownAdvantages

– Cash accounting system– Liability mitigation: notice not required– Control

Disadvantages– Repair and upkeep– Annual price hikes or upon lease renewal– Liability

Partnerships

Protect your partnership• Choose wisely, carefully, consider a “trial run”• Balance the work load; establish your roles• Compromise• Have a contingency plan• Consult an attorney and put it in writing• Communication is important to avoid a divorce• Keep your spouse out of the business

Considerations• Events causing termination of a relationship• Retirement• Voluntary termination to leave • To start a competitive practice• Involuntary termination –principals disagree• Death• Disability• Felony conviction – loss of license

Partnership contracts• Name, time commitment; prohibited acts, duration• Contributions, allocations & cash flow• Loans & leases; partnership sale or adding new partner• Income, expenses, capital expenditures & withdrawals• Books & records• Competition agreements• Partner relations – death, disability, buy out, resignation• Insurance: how to be paid?

Read carefully• Document everything• Never argue; never yell• Never get angry• Do your research• Don’t be greedy• Remember, act in haste, repent in leisure• Plan and prepare for the worst

Going for help

• State chamber of commerce

• Professional associations

• Buying groups

• State/federal employment agencies

To do list

• Take a basic tax preparation class • Select a CPA for small businesses• Review contracts and categorize by topic• Create a profit-and-loss statement• Set 5- & 10-year financial & practice goals• Write or re-evaluate office policy document • Establish emergency protocols• Develop a mentor relationship

References

• Classe, John, O.D., J.D. - Legal Aspects of Optometry

• Dufour, James T. - Optometric Office Injury& Illness Prevention Guide

• Miller, Pamela J. O.D., J.D. - A Handbook for the Ophthalmic Practice Documentation and Record Keeping Made Easy

• AOA

References cont.• Primary Eyecare Network - Personnel File

Desk Reference Set • Steinberg, Craig S. O.D., J.D. - Employer’s

Guide for Optometrists• The Optometric Office and Illness Prevention

Guide - Vision West• California Compliance Catalog–

www.calbizcentral.com

Thank you

Pamela J. Miller, O.D., F.A.A.O., J.D.

909.862.4053

drpam@omnivision.com

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