A diligent business owner reviews their bills to make sure they are accurate and consistent. We also should keep an eye out for new vendors that can offer us (a) the same great product/service at a reduced rate, or (b) a better product service at a competitive rate.
Over the past four years that my practice has been open I had noticed significant increases in my quarterly bill from Stericycle, a national company who handles medical waste management. A smaller company came to my local dental society meeting and had a better offer, so I called Stericycle to cancel service. That’s when I got really angry.
The gentleman on the phone informed me that I would have to pay “liquidation damages” to get out of my contract. Apparently I had signed a contract with them through June 2015 and it would cost me approximatly $1900 to get out of it. Hmm… I don’t remember signing any such agreement. I asked for a copy of this contract and they sent it via email. Nope, as I thought, neither my partner nor I had signed it. Back when I opened my office in 2010 this company received an email from my dental assistant to arrange for service. That was all they needed to set up a binding, auto-renewable contract that permits them to raise fees without any notification. Excuse me? A “digital signature” from a staff person in my office who didn’t know she was signing a contract and would never have the authority to do so anyway? They never sent a printed copy, so my partner and I were under a contract that we didn’t even know existed. Is this legal?
It’s legal but probably not enforceable. I have a good case to contest the early termination fee and I’ll be sure to keep you updated. Here are some pearls I’ve learned while researching this subject:
(1) An employee can sign your business into a contract, however there needs to be a precedent for it. For example, if your office manager has been officially given the authority to sign contracts on your behalf and has routinely done so in the past, then you will be held responsible for these contracts and can’t plead ignorance. This is more of an issue for larger corporations that have dozens or hundreds of employees in various management positions; the typical dental office only has a hadful of employees. The safest practice is to not allow your team to sign contracts themselves (assuming they even know what they’re signing). Fortunately, there are only few vendors we work with who require contracts in the first place.
(2) A hand-written signature is still the best way to do business, while electronic signatures are not the most effective way to enter into an agreement. Make sure any signed agreements you create with your patients are done by hand and not email (e.g. financial plans, consent forms, etc.)
(3) Do research on the companies you work with. Did you know that Stericycle was successfully sued in January of 2013 to the tune of $2.4 million for overcharging New York State governmental agencies? I Googled that last week. In the future, I’ll be sure to run Google searches on companies I work with.
(4) In New York State a company cannot auto-renew without your written approval served personally or by certified mail, at least fifteen days prior to the day the contract auto-renews. Your State may have a similar policy. We terminated the contract before the auto-renew point came up, but this is still a good thing to know. Personally I think auto-renew clauses in vendor contracts are a bad idea. Which leads me to…
(5) Look for sticking points in your contract. Early termination fees may go by other names (“liquidation damages”) and are a big no-no in my mind. We should be able to terminate service at any time without a reason. Stericycle also had a provision in my contract that they can raise their fees without notice. That also doesn’t work for me. And a five-year contract? Why would I ever sign that? Oh right, I didn’t…
So I had a contract that I never knew about until I called to cancel service. I hope this story makes you re-evaluate your relationships with your vendors. Keep copies of your contracts (assuming you ever even freaking knew about them) and be cautious about entering into long and binding agreements. As small business owners we need to be nimble on our feet to control overhead and keep the doors open.
Wow, so apparently many of you have had similar experiences with Stericycle. I guess I’m actually not that surprised. So here’s what’s happened since I wrote this four months ago.
I mailed Stericycle a check for the services rendered thus far, a little over $300. Included with that check was a letter on my office stationary that was signed by both myself and my business partner. In the letter I explained the basis for my contesting the existence of a contract and my refusal to pay the “liquidation damages.” Now here’s the important part: I also wrote that if they cashed the check for services rendered then that meant that both parties were satisfied and no further action would be taken by either side.
Well, a couple of weeks later we saw that they had cashed our check. Case closed, right? Nope. I get a call from them a couple of weeks later saying “We’ve read your letter, what seems to be the problem?” I re-explained the situation and said the matter appears to be closed since they cashed the check. How can they continue to ask for their early termination fee when my terms were clearly written in the letter? “Oh,” they said, “well our billing department is separate from our accounts department,” or whatever the names of their departments are. Basically they were saying that the person that opens the envelope and cashes the check doesn’t have the authority to read the letter that came with it and make a decision about the account. Hmm… doesn’t that sound similar to the scenario that occured to me? My dental assistant doesn’t have the authority to enter me into a contract but they snuck one into an email attachment anyway. At least I had the decency to write a physical letter and explain my intentions multiple times over the phone with Stericycle beforehand.
Before we ended the call, the representative had one more argument for me. She said that I must have known I was in a contract because I had paid my bill every quarter for years. What?!? That doesn’t make any sense. I pay many bills from many vendors every month but virtually none of them have any sort of contractual agreement with me. And nowhere on the Stericycle bill does it ever make reference to a contract. So that was a bad argument.
In the end, she told me my account would be sent to collections. I said sure, fine. A couple of weeks later I get contacted by the collections agency. I tell the entire story and they say they’d look into it. I get contacted again by the agency and they said they spoke with Stericycle and they still want to get paid. No duh. I re-explain the situaiton and this time I fax a copy of the letter I had sent. My claim to the agency is still that because Stericycle cashed that check the matter is closed. That was about a month ago and I haven’t heard from them since.
So maybe my Stericycle story is over. Maybe they’ll come back. But I implore you to fight these guys if they have employed similar unsavory business tactics to lock you into unfair contracts that you didn’t even know existed.