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Maw v. Advanced Clinical Communications, Inc.

179 N.J. 439, 846 A.2d 604 (2004)

EMPLOYER-EMPLOYEE; NON-COMPETITION; CEPA—If an employee’s refusal to sign a non-competition agreement is not over any matter that would be a violation of a clear public policy, then the employer’s firing of that employee because of the refusal does not violate the Conscientious Employee Protection Act.

As a condition of continuing employment, an employee signed a non-compete agreement. The agreement precluded the employee from working for any competitor or customer of the employer for a period of two years after the termination of her employment. She was told that she could seek legal advice concerning the agreement. However, when she presented revisions made by her attorney, the employer said that no changes would be made. Therefore, the employee did not sign the agreement, which led to her firing for failing to comply with company policy.

In response, the employee brought a claim under both the Conscientious Employee Protection Act (CEPA) and the common law for wrongful termination in violation of public policy. She claimed that the employer committed impermissible retaliatory action when it terminated her because of her refusal to sign the agreement. She argued that such a termination was contrary to public policy. The employer moved to dismiss the compliant for failure to state a claim. The Law Division granted the motion, and held that the complaint failed to assert a sufficient public-policy interest within the meaning of CEPA, or under common law. The Appellate Division reversed. It held that the lower court had improperly dismissed the claims before the employee had a chance to develop her case through discovery.

On appeal, the Supreme Court held that the employee’s private dispute over the agreement did not violate the public policy expressed in CEPA. CEPA prohibits an employer from taking retaliatory action against an employee who refuses to participate in any activity which he or she reasonably believes is incompatible with a clear mandate of public policy. This “clear mandate of public policy” conveys a legislative preference for conduct within the public interest. Therefore, the activity that is complained about must have public ramifications, meaning that the dispute between the employer and employee must be more than a private disagreement. In this case, the Supreme Court held that the disagreement was private in nature because the dispute was over a non-compete agreement. The employee’s CEPA claim also failed because the State’s public policy concerning non-compete agreements was not set forth in a “clear mandate” and did not implicate public health, safety or welfare and did not implicate protection of the environment. Further, the Supreme Court held that non-compete provisions are not per se illegal. Such agreements are enforceable if they simply protect the legitimate interests of the employer, impose no undue hardship on the employee, and are not injurious to the public. Applying these tests to the case, the Supreme Court held that the disagreement did not violate a clear mandate of public policy because the employee had other available options. If she could not negotiate agreeable terms, she was free to dispute the reasonableness of those terms if and when the employer attempted to enforce the agreement. The burden would then have been on the employer to hire counsel and initiate enforcement litigation.

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