Saying hello to separation agreements

Saying hello to separation agreements

Let’s get to know what these documents are, how they can help and why they might benefit your veterinary practice (and your wallet).
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Jun 29, 2017

Photo: Shutterstock.comThere’s a new legal issue poking its head out from the woodchuck hole of veterinary associate contract law, and you’ll want to guide your career horse around it carefully so you (and your bank account) don’t come up lame.

With increasing frequency, correlating strongly with the rise of corporate veterinary medicine, associates departing from veterinary clinic employment are being asked, encouraged and perhaps even required to read and sign a “separation agreement.” This is a document that basically memorializes the terms and mutual understandings of the veterinary hospital and one of its veterinarians when one or both parties decide it’s time for the doctor to move on.

Why should I sign a separation agreement?

Most associate veterinarians assume that when they decide to leave a practice, they’ll simply collect their belongings, hug their favorite co-workers and head out the door. They certainly don’t think leaving a veterinary clinic will be like retiring from the CIA with its debriefings, confidentiality agreements and whatnot. And while this is mostly true, a separation agreement does come into play when circumstances have somehow changed between the associate’s hire date and his or her departure date. Such a change may make a separation agreement desirable for both the clinic owner and the departing doc.

Changed circumstances? Like what?

Changed circumstances can occur either by happenstance or by intention. Here are several common examples where altered elements of the employment relationship may lead to the need or desire for a document “outlining the terms” under which a veterinarian would exit his or her employment.

Compensation dispute. A separation agreement could be used to set out the terms under which an employed doctor has agreed to waive her legal rights with respect to past compensation improprieties in exchange for a lump-sum payment or continued phantom employment.

For example, let’s assume Doctor A has worked for Venus Candy Co. through one of its recently acquired animal hospitals. The practice owner who sold his clinic to Venus owed a month’s vacation to Doctor A at the time of closing. Doctor A continues to work at the hospital for three months and neither the old owner nor Venus will compensate her for the vacation due her under her old contract. Doctor A agrees to leave the practice but Venus requires her to sign a separation agreement relinquishing all legal rights against Venus, its predecessor owner and any other potential defendants with respect to the unpaid vacation time—in exchange for a lump-sum pre-tax payment of $7,000. (Or possibly for several weeks of regular salary payments without the requirement of actual attendance at work.)

Poorly drafted employment agreements. Sometimes a separation agreement will be utilized in order to introduce a term that was inadvertently left out of an employed veterinarian’s original hiring document (engagement letter or employment contract). Consider this situation:

Doctor B loves working at Happy Paws Clinic—he gets along with the owner well and his co-workers are terrific. But after he’s worked there for 10 years, the clinic owner marries a high-maintenance guy she met in a local casino. Suddenly the practice is “all about the money” and the new hubby takes over the books to make sure every possible dollar is logged. The work environment becomes terrible and Doctor B now wants out.

The practice owner sees the writing on the wall and fully expects Doctor B to be on Facebook and every other social media site telling the clients of Happy Paws exactly why he left. Since this type of bad press could hurt the business, the owner offers Doctor B a deal:

“Doctor B, we know you aren’t happy here but we have a business to protect. Your employment has a noncompete, which you acknowledge applies to you, but it has no disparagement clause preventing you from slandering us on the web. I’m offering you a $5,000 lump-sum ‘severance’ check in exchange for your agreeing to sign a separation agreement including a blanket nondisparagement clause.”

Other elements. Here are a few other examples of instances when a separation agreement might come into play:

> An employed doctor might waive any legal rights for back production pay in the event that her compensation wasn’t calculated correctly based on her contract. Her boss might know his bookkeeping has been messy and haphazard over the years and doesn’t want to worry about a post-employment lawsuit. In exchange, he might offer to reduce the length of the noncompete from two years to one.

> A clinic owner is close to retirement and one of his long-time associates is leaving. It’s all on good terms, but the owner hopes to sell the practice to a corporation and cruise into retirement. Unfortunately, he suspects that his accountant may have made errors in funding the departing associate’s 401(k) plan. A separation agreement might be called for to release the clinic owner from any liability for negligent management of the retirement program, possibly in exchange for a one-time bonus that the associate could put into a contributory IRA.

> An associate is discharged from a practice because, though the owner had no religious biases whatsoever, the clinic staff was rude and spoke inappropriately to the associate because of his faith, resulting in a toxic work environment. Practice management offers a separation agreement to the departing doctor, prohibiting him from filing a complaint with the Equal Employment Opportunity Commission (EEOC) in exchange for $50,000. (Think this is outrageous? Read on.)

To sum it up, the separation agreement has its place in certain circumstances when a veterinarian leaves his or her employer. These agreements can provide protection and a certain degree of security, comfort or compensation to one or both parties. These agreements should be negotiated in good faith and in compliance with all applicable laws.

And, yes, you guessed right in my final example above. A promise not to file a claim with the EEOC for inappropriate discharge is not an appropriate term for inclusion in a separation agreement. Federal law controls the right to file an employment discrimination claim. As such, that right cannot be contractually circumvented or waived.

Christopher J. Allen, DVM, JD, is president of the Associates in Veterinary Law PC, which provides legal and consulting services exclusively to veterinarians. He can be reached via e-mail at [email protected]