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Comprehensive Psychology System, P.C. v. Prince

375 N.J. Super. 273, 867 A.2d 1187 (App. Div. 2005)

EMPLOYER-EMPLOYEE; NON-COMPETITION; PSYCHOLOGISTS—Even though physicians can be bound by non-competition agreements, psychologists cannot because of a Board of Psychological Examiner’s regulation barring enforceability of such contract provisions.

A professional neuropsychological service provider entered into an employment agreement with a psychologist. The agreement prevented the psychologist from practicing psychology within a radius of ten miles of any of the employer’s offices or any hospital utilized by the employer for a period of two years. After the employee left, the employer sued the psychologist for breach of the agreement. The lower court refused to enforce the restrictive covenant, finding that the restrictive covenant was barred by the regulations of the Board of Psychological Examiners, codified in N.J.A.C. 13:42-10.16. Those regulations prohibit any employer from entering into an agreement that restricts the right of a psychologist to practice his or her profession after termination of an employer-employee relationship. The Appellate Division affirmed. It disagreed with the employer’s argument that the restrictive covenant was not per se unenforceable. The employer pointed to a case that held that restrictive covenants in employment contracts between physicians are enforceable “to the extent that they protect a legitimate interest of the employer, impose no undue hardship on the employee, and are not injurious to the public.” The employer contended that, although the case dealt with physicians, it was also applicable to psychologists. The Court disagreed, noting that the case cited by the employer dealt with the issue of enforceability of restrictive covenants where there were no special regulations governing the profession. In this case, the Board of Psychological Examiners had specifically prohibited restrictive covenants. In addition, the Court noted that there was a public policy consideration not to interfere with the course of ongoing treatment between a psychologist and his or her patient.

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