Heads up, North Carolina hospitals and doctors! On Wednesday, September 30, the North Carolina Supreme Court will hear oral argument in Hamlet v. Hernandez. The Court’s decision may have a significant impact on the way physicians work and negotiate with hospitals in North Carolina, and could have ripple effects extending to employment practices in other industries.

Background

A hospital system hired Dr. Pedro Hernandez as an independent contractor and gave him hospital privileges. The contract had a 36-month term and provided that Dr. Hernandez could choose to become an employee of the hospital 18 months into the contract term.

When his private practice failed, Dr. Hernandez tried to exercise his option to be hired as an employee. The hospital did not send him a new contract of employment but apparently believed that his original agreement encompassed the “employment” option. However, Dr. Hernandez began looking for work elsewhere and shut down his practice more than a year before the end of his contract period with the hospital.

The hospital sued Dr. Hernandez for breach of contract and won after a jury trial. The court granted the hospital’s motion for a directed verdict on the physician’s counterclaims, including a claim for fraudulent inducement brought under the North Carolina Unfair and Deceptive Trade Practices Act. With respect to that counterclaim, the hospital successfully argued that both Dr. Hernandez and the hospital were in exempt “learned professions” under N.C.G.S. Section 75-1.1(b). The statute does not apply to “professional services rendered by a member of a learned profession.”

The legal issue

In October 2018, the North Carolina Court of Appeals reversed 2-1 the trial court’s directed verdict on the Unfair Trade Practices claim. According to the majority, although the physician was “learned” with respect to the practice of medicine, he was not so “learned” in business or employment negotiations. (Then-Judge Mark Davis – now an Associate Justice on the state Supreme Court – dissented from this part of the court’s opinion.) The issue before the Supreme Court will be whether the “learned profession” exemption applies to professionals who are negotiating business or employment arrangements.

As part of its traveling oral argument initiative, the Supreme Court will hear oral argument at 11 a.m. Monday, September 30, at the Rowan County Administration Building in Salisbury.

If the Supreme Court agrees with the Court of Appeals, North Carolina hospitals and medical practices – knowing they are subject to claims for unfair and deceptive trade practices – will be forced to use an unprecedented standard of care when negotiating with physicians.

Tara Muller is a Superior Court mediator and N.C. appellate attorney focused on serving as consultant and outside counsel for litigators who outsource. She can be reached at www.mullerlawfirm.com, or (919) 526-0001.

September 11, 2019/by Labor