What Happens To Employees When You Sell A Medical Practice?

minute read · How to Sell A Medical Practice, Preparing To Sell A Practice, Creating A Sales Contract, Transitioning After The Sale

Points To Ponder When It Comes To Employees

A valuable medical practice has several key components, and whether the practice is being sold as an asset or an entity sale.

If employees are a key part of the success of the practice, their future will also play an important part of the sale of the practice.

When selling a practice, there are some basic options where employees are concerned:

  • Some or all employees stay with the practice
  • The employees leave the practice
  • The buyer is undecided

The Employees Stay

If the buyer of the practice is interested in keeping some or all of the team intact, one way the seller can attempt to ensure a seamless transition is to set up employment contracts with those employees in advance of the sale. The contracts would include:

  • How long the contract is in force
  • The wages and benefits the owner will provide
  • If it will last more than a year, it may be good to add provisions for salary increases, and perhaps a bonus at the end of the contract period
Once the contracts are set up, the way that they are transferred over to the buyer largely depends upon what type of sale you are doing.

If it is an entity sale, the any contracts that the existing corporation has will automatically be transferred over to the new owner unless specifically excluded as part of the agreement.

If it is an asset sale, the contracts themselves are assets and need to be specified as part of the assets being sold.

The sales contract should also obligate the buyer to keep to the letter of the contracts (wages, benefits, etc.) and indemnify the seller in case the employees later have some problem or decide to initiate litigation based on the way they were treated by the new owners.

Two final notes here:

  1. When the seller creates the initial employment contracts, they should have as part of them a stipulation that they are transferable.
  2. The buyer or seller may wish to have a non-competition clause written into the employment contract. This way a key employee cannot leave with valuable information about your business and work for a competitor nearby. Note that not all states will enforce non-competes.

For more on non-competition agreements, see our post on them here

Setting up contracts like these is something we specialize in and would be happy to help you with. Contact us to learn more.

The Employees Go

The buyer of a medical practice may decide to bring in their own crew, or, if it is a particularly small practice, take over employee functions by themselves. In this case, the seller should let those employees know their fate well in advance. However, not before the buyer has signed a sales agreement and they and/or their new employee(s) been brought up to speed on the office processes and procedures.

A buyer may also opt to…

Wait and See

If the buyer is unsure, it may be best to leave the employees out of the sales contract, and simply have a wait-and-see attitude. The buyer can take over the practice, get to know the employees, and decide how and if s/he wants to proceed with the current setup or change it up a bit.

If this is how things will go, be sure as the seller that you do not have employment contracts set up that you will be violating (and thus inviting potential litigation from those employees).

There are as many different employment situations in a medical practice as there are practices being sold. As we’ve said above, sticky situations and legal questions may require the advice of a good attorney.

We have also been exposed to many medical practice sales that involve employees, and we’re more than happy to discuss them with you. Contact us now using the form below. We'll provide more information on your options and the best way to go about things in your particular situation.

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