Small Firm.  Big Results.
North Carolina Court of Appeals Rules Non-Compete and Liquidated Damages Provisions Unenforceable for Public Policy

In Aesthetic Facial & Ocular Plastic Surgery Center, P.A. v. Zaldivar , the North Carolina Court of Appeals last month unanimously affirmed a lower court’s ruling that a former employer’s restrictive covenants against a highly specialized physician were unenforceable because they would harm public health by restricting patient access to a scarce medical resource in violation of public policy.

Dr. Renzo Zaldivar, the former employee, was an ophthalmologist with training in oculo-facial plastic and reconstructive surgery—a scarce subspecialty throughout the state. In 2008, Dr. Zaldivar joined Aesthetic Facial & Ocular Plastic Surgery Center, P.A., and his employment agreement included a covenant not to compete, a covenant not to solicit former patients or divert business, and a liquidated damages provision. The term of the restriction was two years. In 2011, Dr. Zaldivar resigned and immediately began his own practice in violation of the restrictive covenants. In late 2014, the former employer brought suit to enforce the liquidated damages provision, among other claims.

Interestingly, the former employer argued that the liquidated damages provision should be enforceable because the two-year restrictive period had already expired and it would not prevent Dr. Zaldivar from providing his scarce subspecialty services to the public. The Court of Appeals disagreed, holding that the both the restrictive covenants and the liquidated damages provision must be reasonable and not violate public policy. Because future physicians in similar circumstances may opt against continuing to practice out of fear of financial penalty, “[t]he practical effect on public health” of enforcing the liquidated damages provision would be the “same as enjoining the physician’s practice[.]” 

If you need assistance with any issues involving your physician employment agreement, please contact Heather Skelton or Ethan Dunn .
Unexpected Tax Issues Can Plague Employers Who Allow Employees to Telework Out of State

Here at Gardner Skelton we’ve seen a recent increase in the popularity of telework. Improvements in technology, cloud-based computing, and the near-universal availability of high speed internet make it possible to provide employees with all the work tools they need in their own home. Businesses cut down on expensive office space, and employees skip the long commute. It can be a win-win in the right circumstances.
There is a potential fly in the ointment: business-level state and local taxes (SALT). 

Generally, if an employee works in excess of a certain period of time in a particular state, the physical presence of the employee could require the employer to withhold from the employee’s compensation state and unemployment taxes for that state. Depending upon the states involved, the employee may be subject to tax from the state in which they work AND where the employer operates.
The employee’s presence and work in another state may also serve as “nexus” for the employer. That is, the employer may owe a portion of its own income tax to that state. A seemingly expected and reasonable result if an employer actively sends employees and representatives into a state to solicit customers and generate revenue. But, what if the employee works solely from home and does not interact with customers?

As with any state-level tax, uniformity is not guaranteed. Some states look at whether the employee’s activities are intended to develop sales opportunities for the employer, compared to “back office” and administrative work. Others consider where the target customers are located (e.g., employer in State A, employee in State B, customers in State C). A growing consideration is work devoted to technology. A few states believe nexus exists if an employee lives there, works from home, and develops software for the employer (a website) or for sale to customers. A notable decision from New Jersey (Telebright Corp., Inc. v. Dir., N.J. Div. of Taxation, 424 N.J. Super. 384 (March 2, 2012) affirmed assessment of income tax to a Maryland-based business due to one employee working from home in New Jersey helping develop the employer’s web-based products. Even though neither Telebright nor the employee solicited business in New Jersey, the court reasoned that whether the employee worked from a home office or one owned/leased by the employer was “immaterial” for nexus concerns. It further asserted that writing software was the same as building widgets - both are “doing business” in the state. While a few years old, Telebright reflects the increasing attempts by states to expand commercial income taxation.

Employment outside of the office is becoming quite common throughout all industries. Technology advances allow a myriad of working environments to provide businesses, and their employees, the best opportunities for financial and personal success. More and more companies employ folks all over the country (if not the world – a discussion for another time). Employees move from state to state for all sorts of reasons, yet may continue working for their company. While mobility and flexibility are overall positive evolutions to the workforce and workplace, be mindful of the tax compliance issues that may result.
For more information or help with your business tax needs, contact Fred Parker.
Employee Files EEOC Charge, Then Copies Five Confidential Coworker Files

Q: Protected Title VII Activity?
A: Not When This Also Breaks State Law .
Employer Pop Quiz: If an employee has filed a charge with the EEOC alleging discriminatory discipline, then that same employee reviews, copies, and distributes confidential personnel files of coworkers, all without authorization, can you fire her for that? As usual, the answer is: It depends. If the employee also broke state law, yes. That is what the 4th Circuit decided last November in Netter v. Barnes .  
Netter had worked for the Guilford County (NC) Sheriff’s Office for sixteen years before being disciplined and losing out on a possible promotion. She then filed charges with the County’s HR department and the EEOC. The County’s HR investigator asked for evidence of discrimination. In response, Netter found five employee files she thought would help her case, copied them, and gave them to the HR investigator. She also gave copies to the EEOC and her own lawyer. She should have told the two investigators where to look, then waited patiently. Instead, she broke a state law that protects County employee personnel files from unauthorized access and disclosure. For that reason, her termination was legitimate -- even though she had been participating in the investigation and opposing alleged discrimination by what she had done, this was not protected activity.
The Sheriff asked the Court to rule that a violation of an employer’s confidentiality policy alone, without the state law violation, would have been enough. The Court refused. Oddly, protection for “opposition” to activity unlawful under Title VII is subject to a requirement of objectively reasonable conduct, but protection for “participation” in investigation of such conduct is not. With only a company policy violation, the same conduct -- even if objectively unreasonable -- could be protected participation in an investigation of alleged discrimination. 
For assistance with handling employee complaints about possible unlawful discrimination, harassment, or retaliation, contact Nicole Gardner or

Community Involvement

GS Lawyers Join the Boards of Directors for Non-Profits

The mission of the American Institute of Healthcare Compliance (AIHC) is to provide classroom and web based training programs to provide education, certification and continuing education to health care administrators to improve the competency in the management of medical facilities in the increasing complex regulatory environment at a reasonable cost.
Founded in 2014, Brave Step is a survivor-led, non-profit organization that works to strengthen adults impacted by sexual abuse through inspiration, education and personalized care. Brave Step’s vision is to inspire individuals to take a brave step; educate the person, family and community on the effects of abuse; and provide personalized care that will help them live a life free from the constraints of abuse. For additional information on Brave Step, please visit .
You're Invited!
Please join Gardner Skelton in supporting local musicians at  Tosco Music Party , April 20, 2019, Knight Theater at Levine Avenue of the Arts!
Want to join us? Let us know by April 16th and we'll make sure there's a ticket for you at the will-call window! Email Robin at  [email protected] .
Gardner Skelton PLLC
505 East Boulevard, Charlotte, NC 28203
704.335.0350 phone / 704.390.7027 fax
Website     Our People    Our Practice     News     Community Service     Contact