Help to ease the pain of partnership disputes
This article first appeared in the Spring 2021 issue of AISMA Doctor Newsline, the newsletter of the Association of Independent Specialist Medical Accountants.
Partnership disputes are time-consuming, costly, stressful and de-stabilising for a practice and the individuals involved. But unfortunately, they are also more prevalent when partners are under pressure, as during the Covid-19 pandemic. We explore common causes of partnership disputes, how to prevent them happening and what to do if one arises in your practice
We frequently see disputes due to:
One of the main causes of partnership disputes is a partner being absent due to illness or injury for a prolonged period of time or for repeated shorter periods. Even in an otherwise amicable partnership, this can put pressure on the other partners which, over time, can result in the other partners feeling they have to take action to address the issue. These disputes can be very sensitive to manage as there may be a tension between providing support for a partner who is ill and the needs of the practice.
Disputes often arise because of an individual partner’s conduct falling short of what is expected of them. This could take many forms, ranging from harassment of staff or flagrant disregard of agreed partnership procedures through to a partner just not pulling their weight. Sometimes conduct issues (which are generally wilful or within the control of the partner concerned) can be confused with capability or performance issues which might indicate an underlying problem such as stress or other type of illness which might merit a more sympathetic response.
Sometimes partners just do not share a common vision for the practice. We frequently see disputes arising where some partners are ambitious and want to modernise and grow the practice and others are content to “tick along”, particularly where there are costs attached to the plans for modernisation or expansion.
Changes in the partnership
A partnership can be particularly vulnerable to disputes during or following periods of change, such as in the lead up to or following a merger or following the departure or arrival of partners or changes in senior management staff. It takes time and effort to integrate new partners or managers and to adapt to losing a partner or manager which might be overlooked when partners are busy with clinical work.
Sometimes disputes are simply a matter of different personalities clashing. These can be difficult to address as it might not be a matter of any individual partner doing anything clearly and objectively wrong. It can nonetheless have a serious impact on the practice if there is one partner who doesn’t get on with the others or with a key member of staff.
Covid-19 has brought additional pressure to bear on practices and at Hempsons we have, unfortunately, seen a number of disputes which can be directly attributed to these pressures. As well as the inevitable strain caused by partner absences due to having contracted Covid-19 or a requirement for partners to self-isolate following exposure to infection, a particular challenge for practices is where one or more partners are clinically vulnerable and this impacts on their ability or willingness to perform certain duties, particularly face-to-face consultations with patients.
What to do if a dispute arises
How you act or react when disagreements first arise can have a huge impact on how the matter progresses. The most important point is to try not to let emotions take centre stage. This may be easier said than done, but emotional responses to the situation are likely to fuel the fire. If in doubt, don’t send that email late at night when you are angry!
You should try to resolve disagreements amicably at an early stage if possible. It is important to keep minutes and notes of any discussions or meetings that take place and, if possible, get the other partners to sign them to confirm them as an accurate record. Where the partners are faced with different options for resolving the matter or if there is no consensus about how to move forward, discussions should be on a “without prejudice” basis (that is, it should be clear that the discussions are not binding and are subject to partners taking advice if they so wish before agreeing to any actions in writing).
If you do have a valid partnership agreement, you should check to see if it deals with the issue(s) in dispute and follow the procedures set out in the agreement. It is important that you comply with your partnership agreement in order to avoid a later claim or counter-claim for breach of your duties by any partner who is in dispute with you.
If you do not have a partnership agreement, or if new partners have joined since the partnership agreement was signed and dated without signing a deed of adherence or otherwise confirming in writing their agreement to be bound by the existing partnership agreement, the partnership is likely to be a partnership “at will” subject to the provisions of the Partnership Act 1890. This can be a very precarious position for the partnership, not least because it means that there is no ability to expel a partner. In the absence of a negotiated outcome, the only option here is to dissolve the partnership which will result in the termination of the practice’s NHS contract unless agreement can be reached for the contract to continue with the other partners.
You should consider seeking legal advice if your partnership agreement does not provide a clear solution or if you are considering taking enforcement action against a partner. If the dispute is not handled correctly from the start, it can be a difficult position from which to recover and may limit your options. Your solicitor will advise on the options available to you and help you formulate a strategy for managing the dispute. It is important to bear in mind that an ill-thought out strategy could backfire and result in the practice having to defend a claim or counter-claim. For example, if you are dealing with a partner that has a protected characteristic under the Equality Act 2010 (such as a disability), there is a risk that the partner might claim that you have either directly or indirectly discriminated against them on the basis of that protected characteristic. Similarly, it is very easy to take a wrong step (such as failing to comply with the notice provisions when serving a notice) which gives a partner a procedural basis for challenging the action you take against them, even if you have a well-founded basis for taking that action.
You might want to consider mediation as a method of resolving a dispute. You are still likely to need legal advice and representation to ensure that you are confident of your legal position and options if the mediation fails, but mediation can be an effective way of settling disputes and helping to prevent the matter escalating. This is often effective because it uses impartial third parties to get to the bottom of the dispute in an objective way and help the partners reach an acceptable outcome.
How to prevent disputes arising
Naturally, disputes are less likely to arise when the partners get along with each other and have common objectives. Accordingly, you should be careful when admitting new partners. You should carry out due diligence on any new partner prior to them becoming a partner in the partnership. For example, do you know their working history and whether they have they had any disputes with partners in the past?
You may be considering admitting someone who has already been working at the practice (for example, a frequent locum or salaried partner) and who you know well. However, you should consider whether this individual will be good in the role of partner. Although they may be able to do the job they currently do, being a partner brings additional responsibilities, such as managing the financial position of the partnership and other general management duties and not everyone is cut out for those responsibilities.
Although it is helpful to work with people you like, this is not necessarily a requirement, nor is it the most important consideration. What is key to a partnership is that you trust and respect the other partners. You should also avoid falling into the trap of thinking that disputes won’t arise because you all get along. Even the friendliest of partners can fall out in difficult circumstances, and those can often be the most difficult disputes to manage.
Having a good partnership agreement is critical. The partnership agreement can provide the objectivity needed to help prevent disputes arising, as well as a mechanism for dealing with disputes that do arise. If the partnership agreement clearly sets out terms such as the duties of the partners, meeting procedures, voting and holiday entitlements, you are more likely to be able to nip disputes in the bud by referring to the policies and procedures agreed by the partners before the disagreement arose. It is easier to agree on the provisions that should apply in different situations when all the partners are on a level playing field and the issues are not personal. For example, it is better to discuss and agree the maternity provisions that should apply before you have a pregnant partner, when the negotiations will be much more personal and sensitive for the individual involved.
To draft a partnership agreement that is suitable for a GP practice, you should seek legal assistance from solicitors who specialise in primary care advice. Although many solicitors draft partnership agreements, most do not understand the intricacies of a modern GP practice and the agreement might not deal adequately with the issues that a GP practice commonly faces. You should consider whether you wish to include a clause in your agreement which enables the partnership to compulsorily retire a partner if relations with them break down (often called a “green socks” clause) even if there are no other grounds. Exercised with care, this can help preserve the stability of a partnership where there is one partner whose personality or conduct is destructive to the success of the practice.
Remember, it is always better to try to prevent a dispute occurring than try to solve it once it has already happened – be prepared!
In summary, you should:
- always have an up to date partnership agreement, drafted by solicitors specialising in medical partnerships;
- seek legal advice as soon as possible whenever you anticipate a dispute arising; and
- try to remain objective in the face of a dispute and do not let emotions take control of the situation.
Alison Oliver and Ross Clark are partners in the primary care team at Hempsons. They advise GP practices, provider companies and primary care networks on partnership and company law issues, NHS contracting, collaboration and governance arrangements. Between them they have handled a considerable number of high value and complex disputes, some of which have involved mediation and arbitration. Hempsons is a leading health and social care law firm ranked as one of the best specialist law firms in England and Wales in 2020.
Disclaimer: this article is for information purposes only and should not be relied on as legal advice. Neither the authors nor Hempsons will be liable for losses arising from reliance on the information in this article. The article is based on the law of England and Wales and there might be variations in other jurisdictions.