Restrictive Covenants
The New Jersey Supreme Court recently decided the case of The Community Hospital Group, Inc. v. More, finding that a restrictive covenant in an employment contract between a hospital and a physician is not per se unreasonable and unenforceable.
The general test of whether a physcian's restrictive covenant should be enforced are (1) whether the covenant is necessary to protect the legitimate interests of the employer, (2) whether enforcement of the covenant would cause an undue hardship on the employee, and (3) whether enforcement of the covenant woudl not be unduly injurious to the public.
Most cases come down to the determination of whether the covenant is necessary to protect the legitimate interests of the employer.
The court in More found that, in addition ot the protection of the employer's trade secrets, confidential information and customer relationships, protecting referral bases and investment in the training of a physician are considered legitimate interests of the employer worthy of protection through a restrictive covenant.
This expansion will necessarily lead to an expansion in the enforcement of physician restrictive covenants. It will also possibly carry over to restrictive covenants in other businesses.
Please advice regarding attorneys familiar with or experts at restrictive covenants.I need a list of attorneys familiar with NJ laws.
Ritu,
Our firm (Stark & Stark, in Princeton, NJ) has extensive experience in NJ representing both companies and individuals in connection with restrictive covenants. Please contact me directly to discuss your specific situation so that we can determine whether we can help you.
Thank you,
Rachel Stark
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Rachel Lilienthal Stark, Esq.
Stark & Stark, A Professional Corporation
P.O. Box 5315
Princeton, New Jersey 08543
phone: (609) 895-7348
Dear Atty. Stark,
Have you seen where NJ courts have applied Community Hospital Group (CHG) v. More case to other industries, e.g., IT Industry? If so, could you be so kind to direct me to such cases?
Respectfully,
/s/
R.A. Rimando
Ryan,
In response to your response to my blog posting, there is one case outside of the medical field that has relied on the More test in its decision: Klabin Fragrances, Inc. v. Hagelin & Company, Inc. 2005 WL 1502254 (N.J. Super. Ch. June 24, 2005). However, the case did not go into legitimate interests in training, etc.
The plaintiff in this case was a manufacturer of fragrances for candles trying to enforce a non-solicitation provision against one of its commission salespeople who went to work for a competitor. The court found that a 3-year, broad non-solicitation provision may not be enforceable since, using the More test, it did not protect their legitimate business interests. The final decision on the case has not yet been made (the decision was for a preliminary injunction, which was denied, but the temporary restraining order against the defendant that had been previously granted remained in place). Based on the facts in the case, it looks like the restrictive covenant may be found to be unenforceable, but will at least be carved out to something more reasonable.
Please let me know if you have any questions.
Thanks,
Rachel Stark
i'm an emergency physician who recently moved to new jersey to work with a specific group under a contract without a restrictive covenant. i have relocated and since bought a house in the area for a job. i was recently surpised with a new contract that has a restrictive covenant. do these covenants really impact emergency room care? do i have any recourse?
Is it illegal for an employer to ask that a physician give up privelidges at the hospital that their practice uses as part of the restrictive covenant? I have been told by other physicians who own their practices that they believe this to be illegal.