It is important to understand what you are signing up for when entering into a services and facilities agreement as a way of working.
There are 2 primary ways that workers can be engaged – employment and contracting. However, it is not uncommon, particularly in the medical and associated fields (eg dentistry, physiotherapy) to see working arrangements taking the form of services and facilities agreements. These agreements are also being used in other fields such as hairdressing and gyms. Under this model, a business – let’s say a medical centre – provides a place for professionals to conduct their independent business. In addition, the medical centre (aka the services and facilities provider) provides support services, administrative and billing services and equipment for the professional to use. Generally, the facilities provider takes a percentage of the amount billed by the professional as its fee for providing these facilities and services. Sometimes, there is a notional fee paid by the professional for the use of the facilities (set off against any moneys the provider has to pay to the professional).
In theory, the model is that the professional conducts their own independent business with the facilities provider simply providing a place and the back up for the professional to be able to conduct their own independent business. It is something like a serviced office arrangement. Sounds fair you say. It is, in theory, a principal and contractor agreement in reverse where the professional is the principal contracting the facilities provider as a contractor to provide the professional with support services.The reality is generally very different however. Services and facilities agreements can have the following features:
1. The supposed principal is not generally permitted to conduct their own advertising. It is the facilities provider that owns the commercial brand that is promoted to the public and any goodwill and property rights associated with that brand;
2. There is a requirement that the professional be in attendance during normal business hours and see patients or clients provided by and specified by the facilities provider;
3. Professionals are not generally permitted to see patients or clients outside the facilities provider’s business;
4. Patients and clients do not belong to the individual professional but to the facilities provider and the professional will have to acknowledge in writing that all records belong to the facilities provider and not the professional;
5. Amounts charged to clients/patients are generally fixed by the facilities provider;
6. Professionals will have to sign a restraint agreement acknowledging that they won’t take or accept patients or clients of the facilities provider once they leave and it is common to specify a geographic area in which the professional will not work for differing periods of time;
7. Professionals are required to follow the policies and directions of the facilities provider and are effectively subject to its control;
8. BUT professionals are still required to have their own insurances in place.
The reality of the relationship is really one of employment in these circumstances. Where a contract is with an individual then issues will always arise of whether the relationship is really one of employment with its associated benefits and obligations. Superannuation may still be payable if the facilities provider is in fact contracting the professional to provide their labour (as opposed to results). However, it is common for professionals to have their own company/family trust arrangements and if it is the professional’s company contracting with the services provider, the legal position can become even murkier. This is because the company is the legal entity involved in the relationship and not the individual.
More refined versions of this type of arrangement are emerging where the principal theoretically has the power to not accept clients and to fix fees. Given the High Court’s recent emphasis of form over substance, the contents of the written document are more important than ever and the reality of the relationship in practice may not be so relevant.
So, much of the time facilities and services agreements can be a sham in practice, if not law depending on the above issues. It may still be commercially beneficial for the parties but it is important to know what you are getting into and the legal implications of these arrangements. Please contact us if you would like any further information or help.