In its first non-compete case involving a physicians, the South Carolina Court of Appeals used mostly well-trodden commercial case precedent to reverse a bench trial holding that the agreements were unenforceable and awarding relief under the Wage Payment Act in Baugh v. Columbia Heart Clinic, P.A., 2013 S.C. App. LEXIS 5, 20 Wage & Hour Cas. 2d (BNA) 202 (S.C. Ct. App. Jan. 16, 2013). Baugh involved two cardiologists who left Columbia Heart in 2006 and, within one month, established their own cardiology practice approximately 300 yards from Columbia Heart’s then-new Lexington County facility. The doctors sought an injunction preventing enforcement of no-compete agreements based on forfeiture and liquidated damages clauses that were intended to prohibit them from practicing or assisting in the practice of cardiology for one year within 20 miles of Columbia Heart offices where they had routinely practiced.
The Court of Appeals upheld the non-compete in a set back for all employees as well as consumers of medical services. Non-competes in the medical field (like many others) limit choices and limit supply for services. However, Baugh ignored robust debate in other states– including a pronouncement by the American Medical Association — concerning what some consider the injurious public impact of physician non-compete agreements. Among the other holdings in Baugh, Court of Appeals held the following:
the non-compete agreements at issue in the case were supported by consideration (a $5,000-per-month/ $60,000 total for compliance with the non-compete agreement) ;
liquidated damages for each doctor of one year’s W-2 income of roughly $591,710 and forfeiture by each doctor of $240,000 — in a combination earned but unpaid salary, pro rata shares of accounts receivable, and the $60,000 noted above – were not penalties; and
unpaid salary and accounts receivable, along with director’s fees, were not wages “due” under South Carolina’s Wage Payment Act (on the rationale that the doctor’s forfeited their rights to these items).
There were several issues that deserved greater consideration–for more in-depth treatment click and read on. [click to continue…]
GREENVILLE, S.C. – Greenville Business Magazine has recognized Andy Arnold as one of the area’s Legal Elite in the practice of Labor and Employment Law.
In its first-ever survey, the magazine sent emails to 850 Greenville-area lawyers and asked them who, in their opinions, were the best lawyers in 20 practice areas. Respondents could nominate lawyers in their firms, but for each in-firm lawyer there had to be an out-of-firm lawyer nominated, although not necessarily in the same practice area.
A total of 95 lawyers were identified by their partners and peers as the Legal Elite of the Greenville area.
Greenville Business Magazine will honor the Legal Elite with a reception Aug. 16 at High Cotton.
The most recent reported South Carolina case involving a non-compete is Team IA, Inc. v. Lucas, 717 S.E.2d 103 (S.C. Ct. of App. Oct. 2011). The case provides only modest insight into the legal landscapes of non-compete agreements, and in some ways creates a bit of uncertainty. In Lucas, the Court of Appeals struck down the nationwide non-compete as being overly broad, but left open the possibility of enforcing the alternative geographic restriction “defined as the states of South Carolina, North Carolina, Georgia and Alabama.” Not unlike the last Supreme Court case on the subject, this case is curious for the issues not addressed in more detail and the cases not cited. But, I get ahead of myself: First the facts. [click to continue…]
After a lull in January, non-compete inquiries to my law office and resulting consults have returned to 2011 levels. The most disturbing trend seems to be that young, ambitious individuals who have seen their pay and commissions cut feel trapped because the risk of fighting a non-compete seems so daunting. Many of these folks believe they can offer more efficient service and better prices to customers. I can’t recall an instance in which the customers committed to an exclusive relationship. These customers stand to gain from competition: This is a fact. [click to continue…]
The law in South Carolina regarding non-compete agreements is sparse. So, trial courts are left to hash out disputes with modest guidance. Unfortunately, too often legal memorandums are not read prior to the hearing. In my last 3 non-compete hearings all in different counties, the opposing parties and I have submitted briefs, affidavits and exhibits before the hearings (two injunctions and one summary judgment motion) and not once had the judge read any of it by the time the arguments began. This would not have been so disturbing but for the fact that two of the three judges who had done no preparatory work felt able to rule from the bench after 15 or 20 minutes of opposing arguments, when some minimal review of the written materials submitted by both parties–even just the written contract itself–was necessary for a minimal understanding of the facts and the arguments. [click to continue…]
I was admitted to the practice of law in South Carolina on November 18, 1992. Just as watching my children age so rapidly before my eyes amazes me, the realization that I have practiced law for almost 20 years is hard to believe. When I first opened my own practice in 1994 I dreaded being asked how long I had practiced law; who in their right mind would hire someone only two years out of law school to handle an important case? Fortunately, the answer was enough for my practice to survive and eventually thrive. [click to continue…]
It is happening. Slowly, states are making it easier for employers to enforce non-competes. Recently, the Texas Supreme Court abandoned a decade of precedent when it expanded the basis for supporting non-compete enforcement. Check out Michael P. Maslanka’s Work Matters blog on this topic. Maslanka states “[w]hile the employer won this case, many employers will lose in the long run. Noncompetes tie up talent, and it is the movement of talent that creates what the concurrence calls “economic dynamism.” Amen.
Next door in Georgia, the state has amended the constitution to change its non-compete law. How much so? The Georgia Non-Compete and Trade Secrets News blog says this: “This new law makes it significantly easier for employers to enforce non-competes and other restrictive covenants against former employees, at least with respect to restrictive covenants in contracts that are signed from this point forward and are thus governed by the new law.” Here is a blog post by Trade Secret/Non-Compete that provides a brief description of the law. The change went into effect in May 2011. However, the Georgia constitution now grants courts to blue pencil non-competes, which South Carolina courts still refuse to do.
Too many employees who have signed a non-compete agreement fail to take notice that they have agreed to be sued in another state. These provisions are known as “forum selection clauses.” The costs of going to another state to defend yourself can be significantly higher than litigating in your home state. At least half of the agreements I review state that the parties have agreed to having another state’s court will decide any dispute. [click to continue…]
The more non-compete matters I review and litigate the more certain I am that geographically based non-competition covenants should be per se unenforceable. What is the logic of preventing an employee from selling widgets in Greenville County just because he has sold widgets to certain customers located in Greenville County? (There is none.) How are such non-competes ever reasonable in a post-employment covenant? (They are not.) Isn’t such a non-compete always broader than it needs to be to protect the former employer’s legitimate interest? (Yes.) [click to continue…]