The Community Hospital Group, Inc. v. More

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.