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Gold, incentives and meh

Q&A: ‘Green socks’ clauses in partnership agreements

Richard Buono answers key questions on ‘no fault’ expulsion caluses in partnership agreements

The existence of a green socks clause can act as a powerful incentive for each partner to perform his duties and, in the event of an irretrievable breakdown in the relationship with a partner, can make it much easier to take effective action to expel him.

Below are key questions to help GPs understand what ‘green socks’ clauses are, why you need them, when they’re used, their disadvantages, and what you should do before signing a deed with such a clause.

What is a ‘green socks’ clause?

A green socks clause is a clause in a partnership agreement which provides for a partner to be expelled on ‘no fault’ grounds. The term comes from the fact that such a clause would even allow for a partner to be expelled for having offensively coloured socks.

In my experience, green socks clauses have become much more common in the last year or two. They are often written into partnership agreements on occasions when the agreement is being reviewed, for example after the retirement of a problem partner (to prevent similar problems happening again) or before a new partner joins the practice.

Why might you need one?

The standard expulsion clauses in a partnership agreement commonly provide for a partner to be expelled if he is significantly in breach of the partnership agreement, if he is suspended or removed from the register or if he becomes bankrupt.  However, there are many common reasons why a medical practice might wish to expel a partner which are not covered by the standard expulsion clauses.  

Examples I have come across in recent months include personality clashes, a partner who has had long periods of time off due to ill health and a partner who was considered by the other partners not to be ‘pulling his weight’ because they felt he did not perform his share of the practice’s administrative duties.  It is also possible for a partner to be under-performing in a clinical sense, without necessarily being in breach of any of the expulsion provisions in many partnership agreements.  

Having an under-performing partner who cannot readily be expelled under the terms of the partnership agreement can sap morale amongst the other partners and amongst the employees of the practice in general and can severely hamper the effective running of the practice.

What are the disadvantages?

The only disadvantage would be if you are an individual partner who is unsure of his position in the practice.  The worry might then be that a green socks clause would be abused.  This risk of abuse can be reduced by ensuring that the clause is only effective if the other partners unanimously agree and by ensuring that the agreement provides for some form of mediation before a partner can be expelled.  

If there are already tensions within a practice then it will of course be very difficult to obtain the unanimous agreement necessary to have a green socks clause inserted into a partnership agreement, if there is not one there already.

When are green socks clauses enforceable?

As the partners are of equal standing when agreeing that a green socks clause should be included within a partnership agreement, there is no reason why it should not be effective in law.  

However, it is important to note that a partner who is being expelled under such a clause could potentially still be able to bring a claim for discrimination, so it is worth seeking legal advice to explore whether it could be said that taking action to expel a partner is discriminatory in some way before seeking to invoke a green socks provision. For example, if a partner who is being expelled is advanced in years then age discrimination could be relevant, or if the partner concerned has had periods of illness it is worth exploring whether disability discrimination could be an issue.

To conclude, the existence of a green socks clause can act as a powerful incentive for each partner to perform his duties and, in the event of an irretrievable breakdown in the relationship with a partner, can make it much easier to take effective action to expel him.

I’m about to join a new practice, and I have noticed the partnership deed contains a green socks clause. Should I agree to it?

The clause could of course be used against you, but conversely such a clause could also benefit you because they give the partnership you are joining a better chance of being able to deal with partnership difficulties efficiently.

You should seek independent legal advice on the green socks clause and on the partnership agreement as a whole. There will also be other clauses in the agreement which you need to be advised on, and there could even be clauses in the agreement which particularly affect you during your probationary period.

Richard Buono is a solicitor with particular experience in GP partnership issues, working in the Healthcare Department at Blacks Solicitors LLP.

Readers' comments (1)

  • If a green socks expulsion is challenged, can I claim tax relief on the legal fees if the matter goes to court?

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