Category Archives: No Legitimate Interest

Physician Non-Competes Upheld by South Carolina Court of Appeals: Baugh v. Columbia Heart Clinic, P.A

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. Continue reading

New 4th Circuit Case Shoots Down Non-Compete

There is a new Fourth Circuit Court of Appeals case, in which the Court held a non-compete was unenforceable: Lapman v. DeWolf Boberg & Associates, Inc., 2009 WL 757368 (4th Cir. 2009). In Lapman, the plaintiff, a former employee and shareholder, had been terminated and had went to work for Synergetics, a direct competitor of his former employer.  Defendant brought a counterclaim to enforce the non-compete.  Applying South Carolina law, the District Court granted summary judgment in favoring for defendant-employer, finding the non-compete to be enforceable because it “only prohibited [Lapman] from working for a direct competitor in positions similar to the ones he held at DBA.” Id. at *3. 

On appeal, the Fourth Circuit began by noting that the non-compete explicitly stated that the plaintiff “will not, directly or indirectly, engage in Competition with [DBA]….” Id. at *6 (emphasis in original). However, the Fourth Circuit unanimously disagreed with the District Court and reversed: Continue reading