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.