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New Jersey High Court Says Plaintiff Failed To Show Non-Compete Agreement Violated Public Policy

 
 

HLD, v. 32, n. 6 (June 2004)

New Jersey High Court Says Plaintiff Failed To Show Non-Compete Agreement Violated Public Policy

Plaintiff Karol Maw was employed by defendant Advanced Clinical Communications, Inc. In 2001, plaintiff was promoted and required to sign a non-compete agreement as a condition of continuing employment. Plaintiff's father, an attorney, reviewed the agreement and suggested changes that plaintiff presented to defendant. Defendant refused to change the agreement and plaintiff refused to sign the agreement, which lead to the termination of her employment. Plaintiff sued defendant for wrongful termination under the Conscientious Employee Protection Act (CEPA). According to plaintiff, defendant wrongfully retaliated against her based on her refusal to sign an agreement that she believed violated public policy. Defendant moved to dismiss the complaint for failure to state a claim upon which relief could be granted. The trial court granted the motion, and plaintiff appealed. The Appellate Division held the trial court had erred in finding that plaintiff had not demonstrated a violation of public policy, and reinstated both of plaintiff's claims. The dissent found plaintiff failed to state a claim under the CEPA, and the trial court did not err because plaintiff's claim was based on a private interest not covered by the CEPA. Defendant appealed.

The New Jersey Supreme Court reversed the Appellate Division's judgment for the reasons stated in the dissent. The high court noted that this was the first time it had to address the meaning of a "clear mandate of public policy" as contemplated by the CEPA. The high court looked to the purpose of the CEPA, which it determined was to encourage the reporting by employees of actions or conduct by employers that is unlawful or a threat to public health or safety. In this case the conduct plaintiff complained of was a private disagreement that did not affect the public. The limitations on employment in the agreement only affected plaintiff.

The high court also determined that any public policy on non-compete agreements was not set forth in a "clear mandate." The high court noted that plaintiff could have disputed the reasonableness of the terms by seeking other employment and then waiting for defendant to enforce the agreement. Therefore, the high court held plaintiff failed to state a claim under the CEPA. A lengthy dissent said plaintiff's claims implicated a clear mandate of public policy because non-compete agreements restrain trade.

Maw v. Advanced Clinical Communications, Inc., No. A-99-02 (N.J. May 4, 2004).

Health Lawyers thanks Lisa D. Taylor, of St. John & Wayne, L.L.C., in Newark, New Jersey, for sending us a copy of this opinion.

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