Monthly Archives: May 2012

Non-Competition Agreements: Overview

Some employers may require new employees to enter into non-competition agreements before beginning work, and such agreements usually take effect after the employer-employee relationship has ended. Employers may require non-competition agreements for a variety of reasons, including protection of trade secrets or goodwill. However, courts generally disapprove of non-competition agreements as limitations on a former employee’s right to earn a living. Therefore, when made the subject of a legal dispute, non-competition agreements are closely scrutinized in the court system.

Legal Requirements for Non-Competition Agreements

In order to be considered valid, a non-competition agreement must:

  • Be supported by consideration at the time it is signed;
  • Protect a legitimate business interest of the employer; and
  • Be reasonable in scope, geography, and time.

Non-competition agreements must generally be supported by valid consideration — the employee must receive something of value in exchange for the promise to refrain from competition. If an employee signs a non-competition agreement prior to beginning employment, the employment itself will be sufficient consideration for the promise not to compete. However, if an employee signs a non-competition agreement after beginning employment, the mere promise of continued employment will not be considered valid consideration for the promise. In this case, the employee must receive something else of value in exchange for the promise. Such additional consideration may consist of a promotion or other additional benefit that was not part of the original employment agreement.

Protection of Legitimate Business Interests

The goodwill developed by an employer in terms of customer relations is an asset, so an employer may use a non-competition agreement to prevent a former employee from capitalizing on that goodwill and competing with the original employer. Likewise, an employer may use a non-competition agreement to protect its confidential information. Generally, in order for the information to be entitled to protection, the employer must show that it took reasonable measures to keep the information secret, and that the information gives the employer a competitive advantage.

Reasonableness is a Key to the Agreement 

In deciding whether to enforce a non-competition agreement, the court will balance the need to protect the employer’s legitimate business interests with any burden that enforcement of the agreement would place on the employee.

Non-competition agreements must be reasonable in duration and scope. The reasonableness of the duration of the agreement will depend on the specific facts of each case. For instance, if the non-competition agreement is designed to protect confidential information, the duration should be no longer than the time for which the information has value. The geographical area covered by the agreement must also be reasonable considering the circumstances. This will depend greatly on the services provided by the employee, and the importance of the services to the employer’s business. Generally, courts will not allow a non-competition agreement to prevent an employee from working in a geographical area where the employer does not do business.

If a court finds that a non-competition agreement is overbroad, it may narrow the scope and duration of the agreement and enforce it as modified, or it may refuse to enforce the agreement entirely if it finds that it was clearly intended to prevent legitimate business competition by the former employee.

Non-Competition Agreements: Getting Legal Help

Employers have a right to protect their relationships with their customers and their confidential information, but former employees have a right to earn a living. When the employer and the employee have entered into a non-competition agreement, these interests must be balanced. If you have questions related to the enforcement of a non-competition agreement with a former employer, speak with an

Players Continue To Receive Bad Advice

Recently, we have become aware of instances where professonal players have received some very bad business advice. Whether your professional career takes you to the juniors, minor leagues or to the big show, you have critical personal and professional questions that you most have answered by your business advisors.

As you engage in and continue with your professional career, below is a list of specific items that you should be aware of and consult regularly with your business advisors on:

Integrated Planning

•Tax planning and compliance

•Life and estate planning

•Estate, tax and financial plans

•Cost analysis

•Multi-generational planning

Lifestyle Management

•Bill paying and payroll

•Cash flow management

•Business and succession planning

•Property management

Risk Management

•Liability management

•Bank financing

•Insurance analysis and oversight

Data Aggregation

•Consolidated statements/analysis/ Partnership accounting

Philanthropy and Foundations

•Philanthropic mission

•Foundation management

Potentia Legal Risks Associated With Online Coupon Advertising

Potential Legal Risks Associated with Online Coupon Advertising

With the explosion of social media and online marketing, members of the dental community “must” be aware of the risks associated with the new marketing.  While dental practices have successfully utilized the services of online coupon companies to attract new patients, there are growing concerns regarding this type of marketing.  The American Dental Association has recently published its opinion on the online coupon advertising issue.  Before a dentist participates in an online coupon marketing campaign, they must be aware of potential ramifications. 

When considering advertising through one of the many online coupon marketing companies, a dentist must consider potential ramifications under state law, federal law, provisions of contracts with third-party payors, and professional ethical rules.  The main areas of concern in these arenas are the potential for criminal and civil penalties that may arise by offering gifts, discounts, and fee-splitting in exchange for patient referrals. 

Many states have laws in place restricting dentists from offering rewards to others for patient referrals or from splitting a portion of revenue generated from patient services.  Additionally, the federal anti-kickback statute generally prohibits dentists’ from offering or paying remuneration to induce others to refer patients that may be eligible for services under a federal healthcare program, including Medicare or Medicaid.

Operation of Online Coupon Advertising Companies

With the explosion of social media and online marketing, several new advertising companies have recently sprung to success.  These advertising companies offer the advantage to dentists by requiring no up-front advertising fees.  Rather, the advertising company posts advertisements on its website for coupons, along with a brief review of the practice advertised, and information about the coupon offered. 

If a patient wants a coupon, they purchase it directly from the advertising company, which keeps a certain percentage of the sales price and passes the remaining money on to the dental practice owner.  The advertised practice relies on the total volume of coupons sold and retention of some purchasers as future patients.  While this strategy may work well for some businesses, dentists and other medical professionals may risk severe penalties under state and federal law, as well as the violation of ethical guidelines, for participation in these programs. 

Referral Gifts

Many states have laws that directly or indirectly restrict the award of gifts as a means of soliciting dental patients.  Some of these laws provide for a broad prohibition making any gifts unlawful, while others may limit the dentist’s use of gifts and rewards only to nominal amounts.  Depending on state law, referral gifts may include cash, gift cards, premiums, rebates, discounts, event tickets, or other items or things of value.  While items like event tickets may not be commonly thought of as a rebate, some states may interpret items of this nature as offsetting the patient’s fees, making them improper gifts.  Because the advertising company receives a fee for each patient that purchases a coupon, that payment may be deemed a referral gift under state law.

Anti-Kickback Statute

The federal anti-kickback statute, 42 U.S.C. §1320a-7b(b), prohibits dentists from offering and paying any remuneration to any person to induce them to refer an individual for the furnishing of a service for which payment may be made under a federal healthcare program (including Medicare and Medicaid).

Dentists giving gifts to others as a means of soliciting patients may run afoul of this provision if they provide services payable by a federal healthcare program.  The Patient Protection and Affordable Care Act, passed in 2010, made it clear that, for a dentist to be found guilty, the government is not required to prove that the dentist knew that they were breaching a legal duty in providing a kickback, but only that they intended to perform the act that violated the law.  

Additionally, because the statute refers to payments that “may be” under a federal healthcare program, a dentist who accepts such payments may be in violation of the law even if payment for the services at issue was not made by a Medicare or Medicaid patient or out of federal funds.

Fee Splitting

Many states have laws prohibiting fee splitting between dentists and third parties.  Depending on the particular state, “fee splitting” may be defined as broadly as “giving or receiving rebates” and as narrowly as “any unearned rebate, refund, commission, preference, patronage, dividend, discount, or other unearned consideration, whether in the form of money or otherwise.” 

Generally, however, fee splitting occurs when a dentist gives or divides a portion of a fee with another person.  Additionally, some states allow certain exceptions to their fee splitting laws to allow dentists more flexibility in managing professional relationships within their office space and advertising.

When a dentist participates in an online coupon advertising campaign, the dentist generally splits the revenue generated from the promotion with the advertising company.  The advertising company will take the payment from customers, keep a portion of that payment itself, and pass a portion of the sales proceeds along to the dentist. 

As in other businesses, the dentist then relies on retention of a certain percentage of patients for follow-up visits, in order to profit from the coupon advertising campaign.  If it is determined that the advertising company secured or solicited patients for the dentist in exchange for money, the dentist may be held in violation of state fee splitting laws.

The dentist may also be found in violation of federal law under the anti-kickback statute as a result of paying the advertising company cash to induce the company to refer a patient for services for which payment may be made under a federal program.  Like some state laws, the federal law makes certain exceptions for a dentist’s participation in a referral program.  However, because the online advertising campaign involves the dentist paying for the volume of patients generated, rather than paying a flat fee to a referral service, this type of advertising may not be subject to the exception.

Ethical Rules

In addition to state laws, dentists are often subject to ethical rules determined by regulations of state agencies.  For instance, the Georgia Board of Dentistry amended its former rules in November, 2010, adding a provision that “[a] dentist shall not give rebates or split fees with a referral source.” 

Additional ethical rules are promulgated by American Dental Association; all members of the ADA volunteer to abide by the ADA Principles of Ethics and Code of Professional Conduct as a condition of membership.  Section 4.E of the ADA Principles of Ethics and Code of Professional Conduct provides that dentists may not “accept or tender ‘rebates’ or ‘split fees.’”  In the same ways that dentists may run afoul of state laws by offering discounts, referral gifts, and fee splitting, they may also run afoul of ethical guidelines.  Similarly, states such as Illinois, Texas, Arizona and New Jersey also prohibit the use of referral gifts. 

Insurance Contracts

Dentists offering discounts, referral gifts, or rebates may also incur legal problems pursuant to the terms of their contracts with third party payors.  Contracts with insurance companies often require that fees submitted to the insurer reflect any rebates or reductions in fees charged to patients.  Therefore, if a discount is given to a patient after the service has been billed to the insurer, the dentist may be held in breach of the contract with the insurer.  As such, the dentist may be required to reduce the cost of services billed to the insurer.

Additionally, many insurance contracts include “most favored nation” provisions.  These terms require the dentist to provide the insurer with the best price that the dentist charges for a particular service.  Dentists who offer a discount to certain patients, even if only a small group over the course of a short time, may be required to reduce the cost of services billed to an insurer thereafter.  In fact, the dentist may be forced to refund money previously paid by the insurer for similar services that were initially billed to the insurer at the dentist’s regular price.

Ramifications

If dentists participate in the actions described above, they may be exposed to significant legal risk.  Dentists found to be in violation of state laws may be subject to fines, suspension, and even license revocation.  Dentists found to be in violation of federal law may be charged with a felony and subject to fines, imprisonment, and exclusion from federal healthcare programs. 

Additionally, if the dentist makes an improper payment to a Medicare or state healthcare patient, he or she may be in violation of the federal Civil Monetary Penalties Law, which could subject the dentist to liability for additional monetary penalties.  Dentists found to be in violation of ethical rules may also be subject to additional penalties as decided by Dental Boards and/or the ADA.  Finally, dentists who are sued and found to be in breach of their contracts with insurers may be subject to civil damages awards, potentially including punitive damages.

Conclusion

Because online coupon advertising is a new and growing trend, its effect on dentists under state and federal law has not fully been broadly determined.  As the penalties imposed upon dentists who are found to be in violation of the law or ethics codes may be severe, the most prudent approach for dentists may be to wait for some time to see how the law develops before engaging in this type of advertising campaign.  Additionally, dentists may seek guidance from state agencies regarding expected determinations under local law. 

Before a dentist enters into an advertising campaign [or social media campaign], they should seek legal advice as to the application of state and federal laws, most favored nation clauses, ADA Ethical rules, and Dental Board rules.  While the marketing of any dental practice is important, an ill-advices marketing campaign could result in a dentist being censured, reprimanded, fined, suspended, or losing his or her license.

Stuart J. Oberman, Esq. handles a wide range of legal issues for the dental profession including practice sales, real estate transactions, lease agreements, non-compete agreements and professional corporations. For questions or comments regarding this article please call (770) 554-1400 or visit www.gadentalattorney.com

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What Qualifies as Extra Label Drug Use

Q: How do I know what qualifies as ELDU?

A: Specific criteria must be followed:

  • A valid VCPR is a prerequisite for all ELDU;
  • Only a veterinarian can determine that ELDU is needed and can administer, prescribe or dispense a medication extralabelly. The veterinarian must direct or supervise ELDU in an animal;
  • ELDU rules only apply to FDA-approved animal and human drugs;
  • ELDU is intended for prevention, treatment, and control purposes only when an animal’s health is threatened. ELDU of drugs for production use and/or in feed is not approved;
  • ELDU is not permitted if it results in an illegal food residue, or any residue which may present a risk to public health;
  • A veterinarian must not pursue use of certain FDA-prohibited drugs in food-producing animals.

ELDU of an FDA approved drug may be used if:

  • There is no approved animal drug that is labeled for such use, or that contains the same active ingredient in the required dosage form and concentration.
  • Alternatively, an approved animal drug for that species and condition exists, but a veterinarian finds, within the context of a VCPR, that the approved drug is clinically ineffective for its labeled use.

There are few restrictions on extralabel use in non-food-producing animals compared to food-producing animals. If the intended use is in a non-food-producing animal, then an approved human drug may be considered for extralabel use even when an approved animal drug for that species and condition exists. Economic reasons for ELDU of a human drug over the approved drug for that species are valid to treat the medical condition. Veterinarians should recognize, however, that human-labeled drugs are approved based on studies in people and their use in animals could vary. In addition, minor differences in the formulation may produce alterations in the pharmacokinetics and biological availability in the animal species compared to humans. Also keep in mind that consistent use of human-labeled drugs when approved animal-labeled drugs are available could create relative disincentives for the animal health industry to pursue new animal drug approvals and could further limit the availability of veterinary drugs.

The following additional conditions must be met for ELDU in food-producing animals:

  • Such use must be accomplished in accordance with an appropriate medical rationale; and
  • If scientific information on the human food safety aspect of the use of the drug in food producing animals is not available, the veterinarian must take appropriate measures to assure that the animal and its food products will not enter the human food supply.

If the veterinarian determines the food-producing animal needs a drug administered in an extralabel fashion, an approved animal drug must be considered for the particular use before a drug labeled for humans is considered. The prescribed or dispensed extralabel drug (prescription legend or over-the-counter) must bear labeling information which is adequate to assure the safe and proper use of the product.

Labor Law Update for Dentists

As of April 30, 2012, most private sector employers will be required to post a notice advising employees of their rights under the National Labor Relations Act. This requirement applies to a variety of entities with a gross annual volume of at least $250,000.00. The poster is available for free at https://www.nlrb.gov/poster or by calling (202) 273-0064.

In addition to the NLRA poster, the U.S. government requires the posting of these workplace posters: 1) Employee Polygraph Protection, 2) Equal Employment Opportunity, 3) Fair Labor Standards Act, 4) Job Safety and Health Protection, 5) Rights Under the Family and Medical Leave Act (for employers of 50 or more individuals), and 6) Uniformed Services Employment and Reemployment Rights Act. You can obtain them for free from the U.S. Department of Labor Web site www.dol.gov/compliance/topics/oster.htm.