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Where will future practice income come from?

So how are you faring since the Health and Social Care Act 2012 came into force on 1 April 2013? After a stormy start (which included delays in contract payments for many practices and complications around the new rent reimbursement processes created by a change in landlord for those practices in NHS Property Services owned buildings) the dust has well and truly settled – leaving many GPs grappling to get onto the ‘GP Federation’ ladder in order to supplement their somewhat diminished income stream.

No longer able to rely solely on funding from NHS England, GPs are now, more than ever, having to become entrepreneurs in business – negotiating terms and bidding for new services contracts from the CCGs and Local Authorities.

The tendering process can be long-winded and time-consuming (unless you are unusual enough to be the only potential provider of a particular service). You may well have concluded by now that your best (and maybe only) chance of success in the new world of competitive bids and tenders, is for you to join forces with your neighbouring Practices. You can share the responsibility, liability and workload (both during the bidding process and after the contract has been won) and when done well you can better protect yourself, your colleagues and your patients from the vagaries of the health commissioners.

Many GPs have concluded that federating is the way forward and it goes without saying that you shouldn’t rely on the goodwill of your GP acquaintances and a handshake to seal the terms of your joint working. There are a number of options available to you when setting up a joint venture company and I will be exploring these in more detail in future blogs.

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Is a Mandatory Retirement Age for GP Partners Enforceable?

Many older partnership deeds include a compulsory retirement age for partners, often specified as aged 65. Should a GP wish to continue working beyond this age, annual written approval from the other partners is commonly required.

On the face of it, such a clause  is discriminatory, in breach of the Equality Act, and therefore unenforceable. But if you are looking to include the clause in your current partnership deed, or if it is already in your deed and you are considering taking action to enforce it, what are the chances of success?

Case study: A law firm’s business needs vs discrimination

A long-running case regarding mandatory retirement ages for partners has set a precedent for future allegations of age discrimination. The retiree in question was the senior partner at a law firm in Kent, who was asked to retire at age 65 in compliance with the partnership deed. The courts found that in most circumstances, it would be discriminatory to attempt to enforce such a clause. This is consistent with the normal position for employees.

The tribunal did however distinguish the situation for partners, and concluded that in certain circumstances it would be acceptable to enforce a compulsory retirement age where the overall benefits to the business merited doing so: “Any determination has to weigh up the needs of the partnership against the harm caused by the discriminatory treatment”.

The key features of the ‘business benefits’ considered by the tribunal were enabling career progression for junior lawyers and, to a lesser extent, avoiding awkward conversations with ageing partners about their deteriorating performance.

This is in some ways a surprising outcome, since in most progressive law firms aspiring partners are expected to achieve partnership by winning new work rather than simply taking over someone else’s hard-won clients, and because a well-drafted partnership deed should already have addressed issues of underperformance.

Partner retirement from GP practices 

Nobody has yet tested the case for mandatory retirement from a GP partnership in law, although we think it is only a matter of time before they do. Whether a judge would arrive at the same decision remains to be seen, but it seems clear to us that there are some significant differences between a GP partnership and a legal partnership.

The career progression argument will have particular resonance for a GP practice, because there is only limited opportunity for younger partners to ‘win new patients’. Also, the question of declining performance is likely to be accorded greater weight.   It therefore seems likely that a GP partnership would have an even better likelihood of successfully defending a well structured compulsory retirement clause than the Kent law firm above.

Our recommendations

If you are considering implementing or enforcing a mandatory retirement age, we recommend the following:

  • Ensure you clearly document the business reasons for your decision;
  • Ensure that the retirement age is applied consistently across all partners and reviewed annually;
  • Update your partnership deed to make clear what process is to be followed;
  • Do not be tempted to copy someone else’s deed as it will almost certainly be out of date;
  • Consider whether you want to tie any compulsory retirement age to the NHS pension age, which will soon be increasing to 68.

Bear in mind that the default position is that such clauses are unenforceable, so if a compulsory retirement clause were challenged a judge would want to see some very sound and consistently applied business reasons before allowing it to be used. The best advice is to simply avoid such clauses altogether, but if you are still keen to include one in your partnership agreement, make sure you seek the appropriate legal advice to ensure it meets the test.

If you or a colleague are planning on retiring soon, or indeed on taking 24 hour retirement in order to trigger your NHS pension, we discuss both matters in our recent article, ‘Planning to Retire as a GP Soon?

For more information about GP retirement and any other related issues, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com