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Since a covenant not to compete may or may not be against public policy, a trial judge too precipitously dismissed a whistleblower suit by an employee fired for refusing to sign one, the New Jersey Appellate Division ruled on April 16. The 2-1 decision, in Maw v. Advanced Clinical Communications Inc., A-3606-01, represents the first time a New Jersey appeals court extended the Conscientious Employee Protection Act to a situation not directly involving employee disclosure of corporate wrongdoing. And since one appeals judge lodged a dissent, the case may well make law at the state’s highest court. The majority held that if noncompete agreements are used merely to restrict competition or to bind an employee to an employer, they can trigger CEPA and also give rise to a common law claim for wrongful discharge against public policy under Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58 (1980). “New Jersey’s strong prohibition against restraint of trade, and against unduly burdening employees by restricting their right to engage in their chosen field of employment, establishes the public policy necessary to support a CEPA and Pierce common law cause of action,” wrote Judge Michael Winkelstein, joined by Judge Steven LeFelt. Judge Mary Cuff dissented, finding no public policy issue. “I would rule that the discharge does not violate CEPA because an employee’s interest in freely moving from employer to employer is primarily a private interest beyond the protection provided by CEPA,” she wrote, noting the plaintiff was not asked to do anything illegal, unethical or incompatible with public health, safety or welfare. Karol Maw, a graphic designer, was hired in 1997 to create marketing and educational materials for health care and pharmaceutical clients. In 2001, her company circulated to all employees above a certain level an agreement not to work for any client or competitor for two years after leaving the company. Maw refused to sign and was fired. In her suit, Maw contended that the clause served no legitimate business purpose because she was a low-level employee, with no client or customer contact and scant exposure to trade secrets or confidential matter. The clause unlawfully bound her and restricted other job opportunities, she claimed. Superior Court Judge Paulette Sapp-Peterson dismissed the suit, finding such agreements cannot violate public policy because they are not per se invalid. She held that the reasonableness of a noncompete clause can only be decided in the context of an effort to enforce it against an employee who signs it, leaves and tries to find work. Reversing, the appeals court saw little logic in waiting. “We see no purpose to require an employee to sign what may be a legally unenforceable noncompete clause, under the threat of discharge, and then wait to litigate the agreement should the employer seek to enforce it at a later date,” wrote Winkelstein. The majority also held that the dismissal of Maw’s common law public policy claim was premature. Though CEPA mandates that claimants waive their right to a common law remedy, they need not choose between the two until discovery is complete and they can make a “meaningful election,” wrote Winkelstein. In addition, the judges reinstated Maw’s claim against company president Michael Forte. Though there was no New Jersey case law on CEPA suits against individuals, the court looked to the statute’s language, which makes an employer liable for retaliation. Individual liability is also consistent with CEPA’s “broad remedial purpose to afford prevailing plaintiffs all of the same remedies that are available in common law tort actions,” added Winkelstein. Maw’s attorney, Richard Schall of Moorestown’s Schall & Barasch, says cases like Maw’s do not come up often because most employees sign rather than risk their job. If the ruling stands, it means that employers will no longer be able to require noncompete clauses on a blanket basis but will have to proceed case by case, says Schall, also president of the New Jersey chapter of the National Employment Lawyers Association. Debbie Rodman Sandler, a partner with White and Williams in Westmont who represents ACCI, says the company will appeal what she calls Maw’s “unwarranted expansion of CEPA.” She noted Cuff’s observation in the dissent that CEPA is meant to protect whistleblowers and no whistleblowing was at issue here.

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