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February 21, 2012
Employment Contracts: Doctor Terminated Before His Start Date Files Suit

A physician claimed that a medical practice and three of its physician members violated the Maryland Wage Payment and Collection Law and breached an employment contract when they rescinded a job offer just days before he was to join the practice and then declined to pay him his salary for 90 days.

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What happened. Around January 2011, “Curtis” met with three doctors, who are individual members of Capital Women’s Care, LLC (CWC), to discuss the possibility of Curtis joining the Hagerstown, Maryland, practice. In mid-February, one of the doctors called Curtis and said they had decided to hire him. Two days later, Curtis received an email from another doctor, welcoming him to the practice. On February 23, 2011, the office manager sent Curtis an employment contract.

As requested, Curtis signed and returned the undated agreement, which included a statement that CWC “may terminate this Agreement without cause, at any time, by giving Physician ninety (90) days prior written notice or payment of salary for such period in lieu of such notice.”

Curtis completed several tasks in preparation for his new job. Among other things, he signed a lease for a nearby apartment and paid 2 months’ rent; sold his Washington, D.C., home at a loss of about $10,000; had professional photographs taken of himself—one of which was posted on CWC’s web site; and attended a 3-day training class in CWC’s Central Business Office in Silver Spring, Maryland, to learn how to use an electronic medical recording system.

The office manager notified him in March or April that his start date would be May 6, 2011. On May 3, one of the physicians called Curtis to tell him that “the agreement was canceled.”

Curtis filed suit against CWC and the three member physicians, alleging violation of the Wage Act, breach of contract, and promissory estoppel (i.e., he detrimentally relied on their “clear and definite promise” to employ him). He sought $266,000 in damages. CWC and the physicians filed motions to dismiss.

What the court said. The court granted the motions to dismiss the Wage Act claim. CWC and the member physicians maintained that Curtis was hired as an independent contractor. But, even assuming he qualified as an “employee” when signing the agreement, the 90 days’ compensation that Curtis sought does not constitute “wages” under the Wage Act, the court said.

“The parties recognize that the Maryland courts have not specifically ruled on whether compensation in lieu of compliance with a contractual notice of termination provision constitutes wages under the Wage Act,” the court explained. In addition, the court said that “[i]n order to constitute wages, … a sum must be due in exchange for some work actually performed by the employee,” and Curtis never performed any work for CWC, since the contract was canceled before his start date.

The court granted the physicians’ motions to dismiss the other two counts, but it denied CWC’s motions to do so.

Regarding the breach of contract claim, the court said CWC contended that the agreement never went into effect, because it was canceled before Curtis started work. However, the court said it is not clear whether the agreement was unenforceable until May 6, 2011 or whether that date simply marked Curtis’ start date.

In granting the physicians’ motion to dismiss the breach of contract claim, the court noted that the agreement was between Curtis and CWC. Citing another case, it said, “Under Maryland law, ‘a person cannot be held liable under a contract to which he was not a party.’” Citing state law, the court said that “members of limited liability companies are not ‘personally liable for the obligations of the limited liability company, whether arising in contract, tort or otherwise, solely by reason of being a member of the limited liability company.’”

For similar reasons, the court granted the physicians’ motion to dismiss the promissory estoppel claim. Horlick v. Capital Women’s Care, LLC, et al., U.S. District Court for the District of Maryland, No. ELH-11-01716 (2011).

Point to remember: Under the Wage Act, the definition of wages is broad: “all compensation that is due to an employee for employment.” That includes bonuses, commissions, fringe benefits, and “any other remuneration promised for service.”

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