January 31, 2014

Buying a Second Practice? Here’s What You Need to Consider

buying a second practice is like putting puzzle pieces together

We work with quite a few doctors who have purchased a second practice at some point during their careers. Here’s one recent set of questions about making that transition, with minimal edits to protect privacy.

“I recently bought a second practice (Practice B) and have some questions about its relationship to my current practice (Practice A):

When Practice B is purchased, from a legal standpoint, do its employees automatically become legal employees of Practice A?

If employees from Practice B are let go during the purchase (a few staff members would not mesh well), will Practice A be responsible for their unemployment benefits?

Should I have the employees of Practice B submit applications/resumes to be re-hired under Practice A?”

These are great HR questions, and in short, the answers are “No, no, and ‘sort of.'” But the details are important, so read on. You’ll also want to pay particular attention to the hiring checklist at the end of my response, which was created by our HR experts.

First things first, though. I’m assuming that when you mention buying a second practice, you mean that you are purchasing its patient records and assets, and that you are combining everyone into a single location? I’ll be making a few broad assumptions here since I don’t know the particulars of your purchase deal. With that disclaimer in mind, let’s proceed to your HR questions.

You asked,

When Practice B is purchased, from a legal standpoint, do its employees automatically become legal employees of Practice A?

Not automatically, but if you keep them, even for a couple of days, they do become your employees. By the way, remember that any failure on your part to give them new I-9s and W-2s does not keep them from being employees.

If employees from Practice B are let go during the purchase (a few staff members would not mesh well), will Practice A be responsible for their unemployment benefits?

One of the things you can do prior to purchase is identify which employees you are sure will not mesh well, and then do not hire them on the day you take ownership. Keep in mind that even this approach has pitfalls. For example, if you decide not to bring over the three women who are pregnant or in some other protected class, that decision could be seen as discriminatory, because you are still making hiring decisions during this process. Also note that the morale of the employees who are hired may be adversely affected by having other employees left behind.

But let’s say you hire everyone and then figure out that a few employees are not a fit. Your responsibilities when it comes to unemployment are determined by a couple of things:

First, there is eligibility, and which employer they worked for during the previous one or two quarters, prior to being fired or quitting. In general, if they are let go prior to your purchase, the unemployment falls on the last employer. State eligibility rules do vary slightly.

The second factor is the reason, supporting policies, and documentation for their firing. Short answer—if you have good policies in place and they have been acknowledged by the employee, you have a place to work from when it comes to documenting and fighting a claim.

In contrast, if you’ve created or adapted your medical or dental office’s employee manual and policies yourself, then you are almost definitely NOT in a good position when it comes to this transition. For example, say you have a policy that forbids gossiping—an illegal policy to have. When you then fire an employee and it ends up in front of a labor attorney, you are in hot water.

Should I have the employees of Practice B submit applications/resumes to be re-hired under Practice A?

You do not actually need to ask them all to re-apply, and frankly that can be very upsetting to the employees. But here is a list of what you do need to do, which, when examined, is quite similar to asking them to reapply. I’ve included the list for everyone’s benefit today.

Hiring Checklist (give us a call if you’d like to discuss this prior to hire, as transitions are unique)

Prior to Hire:

  • Employee application on file
  • Background check forms signed
  • References checked
  • Background check completed

Upon Hiring:

  • Personnel file created
  • Any Wage Notice or New Hire Letter required by your state
  • I-9 form completed, federal/state withholding W-4 (available for download at http://www.uscis.gov/files/form/i-9.pdf and http://www.irs.gov/pub/irs-pdf/fw4.pdf)
  • State withholding forms completed (available at http://www.dol.gov/oasam/doljobs/statetaxforms.htm#.UOsq76zQx9k)
  • Copy of Employee Handbook distributed, and all Acknowledgements signed and returned
  • Discussion items with employee:
    • Schedule
    • “Getting acquainted” period
    • Performance reviews and Corrective Action Policy
    • Salary
    • Bonus plan
    • Insurance benefits eligibility
    • Sick leave – Call Out Procedure
    • Vacation eligibility
    • Recording of Time
    • Open door/employee concern reporting

Obtain a copy of any necessary certifications

  • Job description – 1 for personnel file, 1 for employee
  • Keys/access codes (if applicable)
  • Nametag/uniform (if provided by office)
  • HBV Acceptance/Declination (medical/dental only)
  • HIPAA statement and training materials (medical/dental only)

For more on this subject, I recommend reading “Strategies in Transitioning a Practice Purchase.” Have additional questions about hiring, firing, or protecting yourself and your business when you’ve purchased a second practice? Members can call us anytime at 866-414-6056.

Friendly Disclaimer: This information is general in nature, and is not intended to replace good counsel about a specific issue with either your attorney or your favorite HR Sherpa.

Friendly Disclaimer: This information is general in nature and is not intended to provide legal advice or replace individual guidance about a specific issue with an attorney or HR expert. The information on this page is general human resources guidance that is believed to be current as of the date of publication. Note that CEDR is not a law firm, and as the law is always changing, you should consult with a qualified attorney or HR expert who is familiar with all of the facts of your situation before making a decision about any human resources or employment law matter.

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Please note: CEDR Solutions specializes in providing expert HR support to owners and operators of independently owned medical and dental practices.