The New Jersey Supreme Court will consider the issue of whether a restrictive covenant in a physician’s employment agreement is enforceable. In 1978, the New Jersey Supreme Court in the case of Karlin vs. Weinberg, 77 N.J. 408 (1978) held that a restrictive covenant in an employment agreement between physicians is enforceable if it meets certain conditions including the protection of a legitimate interest of the employer, imposes no undue hardship on the employee and is not injurious to the public. At the time, the American Medical Association had no ethical concerns against a reasonable agreement to not practice within a certain area for a certain time if it was knowingly made and understood. However, the American Medical Association has since taken the position that non-competition agreements among physicians is not in the public interest and may very well raise ethical concerns.
The New Jersey Supreme Court will now consider whether the Karlin decision from 1978 needs to be addressed and potentially overturned. At issue is whether a covenant that barred a physician from practicing medicine for a period of two years within 12 miles of his employer is enforceable. Also, for consideration is whether restrictions preventing physicians from practicing at a specific hospital and relinquishing hospital privileges is enforceable.
In the case of Dwyer vs. Jung, 133 N.J. Super. 343, the Court held that a restrictive covenant in an attorney partnership agreement is void as against public policy. The question for the New Jersey Supreme Court to now decide is whether restrictive covenants in physicians’ agreements are unenforceable as against public policy.