Understanding NDAs in Dental Offices

Non-Disclosure Agreement: What Is It?

A non-disclosure agreement is a legal contract between at least two parties that protects certain confidential information that is disclosed between the parties in a business arrangement. A non-disclosure agreement can be one way, meaning only one party or company keeps the information private, or they can be mutual, meaning that the nondisclosure provisions apply to more than one party.
A non-disclosure agreement is used in most professional settings, including dental offices. A non-disclosure agreement is similar to a confidentiality agreement which generally communicates the same concepts.
The purpose of a non-disclosure agreement is to protect confidential and often business information from being shared with other people or companies. In order for a non-disclosure agreement to be enforceable, there must be a description of the information to be kept confidential and the parties responsibilities in keeping the information confidential. Basically, an NDA requires employees to hold secret and not to disclose or use information given to them by their employer or former employer that is considered confidential information . An NDA gives a clutter, for a period of time, that the information conveyed is protected from disclosure. A non-disclosure agreement should also define the scope of the non-disclosure obligations, having an unlimited period of time is usually problematic.
Common types of a non-disclosure agreement include non-competition agreements, non-solicitation agreements, and trade secrets that are not covered under state or federal trade secret law. The details of nondisclosure agreements vary from case to case, however, usually a non-disclosure agreement is intended to prevent the disclosure of information to any third parties that are not bound by a confidentiality obligation as part of their job for the company. For example, dental offices do share patient information with third parties, however there are typically established laws that regulate the sharing of that information, such as HIPAA, but nondisclosure agreements exist to make it clear to the employees that sharing of that information is prohibited.

Non-Disclosure Agreements and the Dental Practice

Non-disclosure agreements are vitally important in all medical offices. In a dental office, employees must sign an NDA as soon as they are hired. Every employee in a dental office has access to sensitive patient information and confidential or proprietary business information. The importance of ensuring that these documents are signed in the very first day cannot be stressed enough. By requiring employees to sign an NDA at the time they are hired, owners of dental practices can ensure that their employees understand the importance of maintaining the confidentiality of both patient and practice information.
NDAs are very standard hospital practice. Doctors, nurses, managing partners, and all other employees can be brought into a lawsuit for allowing a leak in confidentiality. Hospitals usually deal directly with doctors however, so it is very necessary for them to issue NDAs before a new doctor begins working. Practicing dentists are not in the very same situation. New partners are required to sign NDAs but the other personnel of a practice should be required to sign them too. NDAs are not usually a very big problem for non-doctor employees, so they are very standard and not likely to result in someone refusing to sign. Make NDAs a part of your contract with any employees in your new dental office, especially for those you will eventually promote to partner if you are practicing as a dental group.

Key Components of a Non-Disclosure Agreement for Dental Offices

Within the context of a dental practice, an NDA typically enumerates the specific types of confidential information that are being exchanged between the parties including: patient information, including medical records and contact information; financial data, such as sales and expense figures and other results of operations; employee information, including payroll, health benefits, and other information relating to employees; trade secrets, including intellectual property such as patents, trademarks, service marks, and copyrights; and proprietary information, including equipment lists, product specifications, and processes.
While the list above is not exhaustive, it is imperative that a dental practice ensure that an NDA contain the following terms: (a) the duration of the NDA; (b) obligations of the discloser to protect its confidential information; and (c) obligations of the recipient to protect the confidentiality of the information and/or maintain the confidential information deleted or returned to the discloser at the end of the relationship.
In terms of duration, the parties generally agree that two years from termination of the relationship would be reasonable. Many states automatically extend the protection of confidential information for at least two years in order to prevent the improper use or disclosure of such information that has been shared with another party, even in the absence of a non-disclosure agreement.

Legal Considerations with NDAs

The question then becomes, what are the legal implications of enforcing such a contract, and what happens in the event a breach occurs, or is suspected?
First of all, if there is no NDA in place then you are stuck with all of the employees before the employee in question’s employment and/or contract status began. You must be able to show that the employee not only had access to your information, but that the employee also had access to confidential information. For example, the secret to the formula of your whitening gel can be protected, but the machine that combines the elements of that whitening gel when mixed will not. Not only that, but you must be able to prove damages. This is an expensive process.
If you have an NDA in place and the employee absolutely, unequivocally violated the terms of the agreement, then you have a much better standing going forward. Court would expect you to have documented evidence (emails, pictures, eyewitnesses, security camera footage, etc.) that prove your point and these are expensive commodities.
However, it is possible for an employee to request that the NDA be terminated upon request. This is known as a unilateral termination, and its justified by lack of interest on the part of the employer in recognizing the NDA. In other words, if an employee no longer has access to confidential information, there is no reason to keep the NDA in place.
The bottom line is that regardless of the NDA in place, once a breach is suspected the employer must act in a reasonable amount of time to determine if the breach occurred as well as assess the damage that breach caused. Doing so will help you minimize losses incurred and increase chances for quick resolution.

How to Create a Non-Disclosure Agreement for a Dental Office

Simply implementing non-disclosure agreements may not be enough when it comes to protecting your practice. Here are some additional steps you should take to ensure that NDAs are effective and your business is protected:

1. Ask All Employees to Sign an NDA as a Condition of Employment

Asking your employees to sign NDAs for employment is entirely legal and often expected by employees. You should include an effective and comprehensive NDA as part of the initial employment packet or within the employee handbook. If current employees do not have NDAs on file, it is perfectly acceptable to tell all employees that an effective NDA is required or you will part ways with the practice. You can provide severance or a small severance bonus if you do part ways with those who refuse to sign new NDAs.
Before an employee starts work, make sure to have the pre-employment NDA signed. In addition, if you are dealing with independent contractors, consultants or freelancers, ask them to sign a NDA on the first day of their engagement. If they refuse, you should not engage these parties for your business.

2. Make Sure All NDAs Are Written in Simple Language

Don’t try to be smart or clever with your NDA, or use legal language just for the sake of it. If your non-disclosure agreements are too complicated, your employees are simply going to sign them and not have any clue what they mean. Be clear and concise , so all employees know exactly what information is confidential.

3. Provide Periodic Reminders

It is essential to make sure all employees remember about their NDA and what constitutes confidential information. This is particularly the case if your practice uses a client management system or a cloud-based software program to manage patient information for billing, scheduling or other purposes. If your everyday work requires access to sensitive patient data, put reminders in that these details are confidential and employees should not give this information out to anyone outside of the business.

4. Perform Internal Audits

Perform periodic internal audits to make sure your NDAs are being followed and your confidential information is protected. If audits reveal that some employees still do not follow the rules, remediate the situation immediately, either via re-training or dismissal if they continue to refuse to comply. Provide regular training sessions for employees, and let them know that periodically reviewing the NDAs is part of the company policy.

5. Give Employees Annual Performance Reviews

Annual reviews are a good time to go over NDAs again with all employees. Use the entire review to address changes in confidential information, along with other areas of importance such as growth strategies. Be open to employee questions and concerns regarding NDAs.

Misunderstandings Related to Dental NDAs

The following are some common misconceptions we hear about NDAs and the realities around those common myths:

1. My employee signed the NDA, this is a contract and they’ve agreed to it, so they have to abide by it or I can sue them.

This is not entirely true. For a contract to be enforceable there must be consideration, which is essentially something of value that passes between the parties. For an NDA, the consideration from you is the company confidential information you are providing to your employee, and the consideration your employee provides is his or her promise to keep the information confidential. In California, however, consideration is required to "meet in writing" before the NDA is signed. So, if your NDA does not include language that states that you have provided some confidential information to your employee, your employee’s signature on the NDA likely will not protect you if your employee lawfully discloses confidential information received from you to his or her own advantage.

2. I cannot disclose the name of my potential new employee to one of my current employees because of confidentiality laws, so I need my potential new employee to sign an NDA before I tell my current employees about him or her.

This is not true. It is true that an employer has an absolute right to prohibit its employees from disclosing trade secrets, but an employer does not have the same right to prevent two of its employees who want to talk with each other about a third employee from doing so. While other laws may prevent disclosure of employee records, the fact that an employee’s NDA might prohibit disclosure of confidential information does not prevent an employee from talking with another employee as such, and to request or ask two employees to keep each other’s names secret and not talk with each other about themselves as a basis for wanting to know whether one has applied for a job with an employer is unreasonable and will not be honored by a court properly considering what happened.

3. I cannot explain to my current employees what I am looking for in a replacement without violating confidentiality laws.

This is also not true. Just as with myth #2, it is true that an employer has an absolute right to prohibit its employees from disclosing trade secrets, but it does not have the right to prevent two of its employees who want to speak with each other about some other employee from doing so. As such, when the company sends out a notice for its employees to apply for the desired position, current employees who want to apply will respond and be considered. When you send out the notice, unless you prohibit your employees from discussing whether they will apply or not, you will not learn who wants to try for the desired position until you receive applications from them. As for proprietary trade secrets such as information about confidential clients, you should give your employees an overview of your practices with such information and how you expect them to preserve the confidentiality.

4. I don’t need an NDA because my employees already know not to disclose company information.

Employers do not know what their employees know, and employers should never assume that their employees know something without training them. NDAs serve the purpose of educating your employees of your expectations and there has to be some motivation for them to keep the information you provide to them confidential upon threat of legal action.

5. An NDA is appropriate for any and all employees.

This is not true. NDAs cannot be used with merely anyone. An employee who receives only limited knowledge is not legally bound by an NDA to continue to refrain from using or disclosing that knowledge and cannot be sued for doing so. At least at the extent of what you have provided them. NDAs do not bind employees who have no access to confidential information. Only employees of executive level and/or supervising employees will work realistically and will survive at least the threshold of a motion to dismiss.

Examples of Using NDAs in a Dental Practice

To really understand the value of NDAs, it helps to look at how they work in the real world. There are countless examples of how they help practice owners protect privacy and their business assets and how they can be misused to create a toxic workplace. Here are two common examples with some analysis:
Example 1: When A Practice Owner Leaves
A stable staff is one of the cornerstones of successful dental practice management. A high turnover and frequent change is detrimental to patient care and treatment and can create dissention among the team. For this reason, it’s not unusual for practice owners to be very sensitive when an employee leaves. Quite likely, such an owner will put a large amount of stock in the idea that just having a non-disclosure of confidentiality agreement prevents elements of a practice loss from occurring. Unfortunately, that isn’t always true.
Example: A hygienist has worked at Dr. Smith’s practice for 10 years. When the hygienist was hired she signed a NDA. During that period, the hygienist became very close to Dr. Smith. She’s been over to the house for dinner, has attended his daughter’s high school graduation, and spent Christmas with the family. Without such a close relationship, Dr. Smith would have questioned the hygienist’s reasons for leaving. But, because they were so close (some might say too close) it never occurred to him that she may be planning to take patients or try to somehow gain financially from stealing them from the practice.
The hygienist goes to work for a competitor in the same area. Without any notice, within a few months, Dr. Smith starts losing existing patients and the top-notch new patients flow has dried up. As this goes on, staff develops a bad attitude because the office was nowhere near as busy as it had been. Everyone is losing. Most people probably knew the hygienist was poaching patients, but no one said anything to Dr. Smith until it was too late. Dr. Smith eventually finds out and tries to go after the former employee for damages, but there wasn’t much she could be sued for.
What’s the Problem with this Story?
Dr. Smith didn’t sustain any injuries because the hygienist signed a non-disclosure agreement. She still left her employment and went to work for someone else. Dr. Smith knew that she was likely trying to steal patients, but he can’t do anything about it because there was no non-solicitation agreement. Even if he could prove that she did actually try to engage in the harmful behavior, there was no enforceable way to stop her. How could he stop someone who wasn’t working for him anymore from engaging in this behavior? It is much more likely that most states would allow people to leave one company and go to work for a competitor , but would not make it easy for the ex-employee to benefit from using confidential information obtained while working for the previous employer. Thus, if a non-disclosure agreement is considered a valuable tool, then a non-solicitation agreement is equally valuable.
Example 2: When a Practice Gets Sold
Doctors and dentists sell their practices for a number of reasons. Sometimes, a person wants to retire and other times the practice is sold because the practice just isn’t profitable enough to continue. Whatever the reason, the seller needs to make sure a loyal and competent staff stays for the new owner. If a non-disclosure or confidentiality agreement was worth something, then wouldn’t a non-solicitation agreement be even more valuable? Absolutely. You shouldn’t make an agreement that prohibits an employee from working for a competitor and then just gloss over the fact that the same employee basically has ownership over the office. This is why a non-solicitation agreement is even more valuable than a non-disclosure agreement.
Example: The selling dentist has entered into a contract to sell the dental practice. The buyer is a large corporation that has very specific policies and procedures. They want all of the employees to stay for 18 months and are willing to pay a large bonus for everyone who does. The selling dentist wants to ensure that the new owner doesn’t just let people go immediately if they aren’t productive. At the same time, the selling dentist wants to reward employees who stay. As an incentive, the selling dentist agrees to pay 50% of the bonuses that each employee earns. On its face this seems like a great deal for everyone associated with the practice. However, when an employee chooses to quit, the selling dentist is no longer getting the employees to stay at his practice. The selling dentist is paying the large bonuses and then losing money through the practice’s day-to-day operations.
What’s the Problem with this Story?
If a non-solicitation agreement has been made, the result can be reversed. The same employee can’t go in and identify patients and start negotiating to take them to another office. The selling dentist can still pay bonuses for staying, but you don’t have to worry about the medical records because the employee will get them back. The selling dentist won’t just hand them to the employee because, frankly, the patient has a right to privacy and no one should give out such information to people who are no longer employed. In short, the selling dentist still makes money, and the employee makes money, with no hidden costs. In fact, the selling dentist probably actually makes more money and doesn’t go into debt to finance expensive incentives.