Employer Law Update for Dental Practice Owners: Payroll, Classification and Noncompetes Heading Into 2027

Your team is your practice's greatest asset — and, legally, one of its largest sources of risk. Wage-and-hour claims, misclassification and restrictive covenant disputes are among the most common legal problems we see in dental offices. Here is what to review before 2027.

KEY TAKEAWAYS

• New W-2 reporting starts now. Qualified overtime for 2026 must be reported separately on W-2s issued in January 2027.
• Classification errors are costly. Salaried managers and contractor hygienists and associates are frequent problem areas.
• The FTC is watching healthcare noncompetes. Overbroad agreements may be unenforceable and can invite scrutiny.
• Small mistakes add up. Unpaid huddles and interrupted lunches create back-pay liability across your whole team.
• Documentation wins disputes. Clear agreements, accurate time records and consistent discipline are your best defense.

Wage and Hour: Where Dental Practices Get Caught

Federal law requires overtime at one-and-a-half times the regular rate for non-exempt employees who work more than 40 hours in a workweek. State that has no separate overtime law; federal rules will govern. The most common dental-office violations are:

• Unpaid time for morning huddles, opening and closing duties, and sterilization after the last patient.
• Meal breaks that are automatically deducted even when assistants work through them.
• Production bonuses left out of the regular rate used to calculate overtime.
• Averaging hours over two weeks instead of calculating overtime each workweek.

New for 2026: Reporting Qualified Overtime

Under the 2025 federal tax law, eligible employees may deduct a portion of their overtime pay. Starting with the 2026 tax year, the IRS requires employers to report qualified overtime separately on Form W-2 in Box 12, Code TT. Qualified overtime is generally the half-time premium required by the FLSA, not the full time-and-a-half payment. Overtime is still subject to withholding, and errors require corrected W-2s.

Because your employees can only claim the deduction for amounts you report, expect questions from staff in early 2027. Make sure your payroll provider is ready now.

Classification: Employee or Exempt? Employee or Contractor?

Exempt vs. non-exempt

Paying a salary alone does not make an employee exempt from overtime. The employee must also meet a duties test. Office managers who mainly perform clerical work, and treatment coordinators or lead assistants without real management authority, are often misclassified.

Employee vs. independent contractor

Temp hygienists, associate dentists, and part-time front-desk or marketing help are often paid on a 1099. If the practice sets their hours, supplies the equipment and patients, and directs how they work, they may legally be employees. Misclassification can create back taxes, overtime claims, benefit liability and penalties.

Noncompetes and Associate Agreements

The FTC abandoned its nationwide noncompete ban in September 2025, then immediately sent warning letters to healthcare employers urging them to review their agreements. Several states have restricted healthcare noncompetes as well.

Some states still allow reasonable noncompetes for certain employees, and a post-employment restriction of two years or less is presumed reasonable in duration. But the covenant must fit the employee's role, and broad restrictions on hygienists, assistants or front-office staff are vulnerable. For associate dentists, non-solicitation of patients and staff, confidentiality and buy-in terms are often more important — and more enforceable — than a broad noncompete.

Other Employer Obligations to Confirm

• Pregnancy and disability accommodation under the Pregnant Workers Fairness Act and the ADA.
• Form I-9 compliance for every employee, and E-Verify where law requires it for qualifying employers.
• Required workplace posters, including federal notices.
• License and credential tracking for dentists, hygienists and assistants performing expanded functions or radiography.
• Termination procedures — consistent documentation, final pay and return of practice property and patient information.

Employer Law Checklist for 2027

• Confirm your payroll provider will report Box 12, Code TT overtime on 2026 W-2s.
• Audit timekeeping for huddles, cleanup, training and interrupted meal breaks.
• Confirm bonuses are included in overtime calculations.
• Review every exempt classification against actual duties.
• Review every independent contractor relationship.
• Have associate, hygienist and staff agreements reviewed for enforceable restrictive covenants.
• Audit I-9 files and E-Verify compliance.
• Update posters, accommodation procedures and termination checklists.

Partner With Oberman Law Firm

Oberman Law Firm represents dental practices in every aspect of employment law — from drafting associate and staff agreements to defending wage claims and enforcing restrictive covenants.

We can audit your pay practices and classifications, update your employment agreements, and help you enter 2027 with fewer surprises.

Schedule your employer compliance review today. Contact Oberman Law Firm at (770) 886-2400, or visit our office at 327 Dahlonega Street, Suite 401, Cumming, Georgia 30040.

Oberman Law Firm provides this material for informational purposes only. The use of a lawyer is an important decision and should not be based solely upon advertisements.