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Community Hospital Group4/5/2005
d physicians differently.
Notably, the AMA, which governs the ethical standards of the medical profession, does not declare restrictive covenants per se unethical. The AMA's pertinent rule provides:
Covenants-not-to-compete restrict competition, disrupt continuity of care, and potentially deprive the public of medical services. The Council on Ethical and Judicial Affairs discourages any agreement which restricts the right of a physician to practice medicine for a specified period of time or in a specified area upon termination of an employment, partnership or corporate agreement. Restrictive covenants are unethical if they are excessive in geographic scope or duration in the circumstances presented, or if they fail to make reasonable accommodation of patients' choice of physician.
[AMA, E-9.02: Restrictive Covenants and the Practice of Medicine, available at www.ama assn.org/ama/pub/category/ 8519.html (last visited February 10, 2005).]
Although the AMA discourages restrictive covenants between physicians, it only declares them unethical if "excessive in geographic scope or duration, or if they fail to make reasonable accommodation of patients' choice of physician." Ibid. That is essentially the same reasonableness standard we apply under Karlin. See also Derek W. Loeser, The Legal, Ethical, and Practical Implications of Non-competition Clauses: What Physicians Should Know Before They Sign, 31 J. L. Med. & Ethics 283, 287 (2003) (noting that E-9.02 "has limited legal impact" because it "merely parrots the reasonableness standard applied by most courts"). Thus, the AMA's ethical rules are consistent with, and not contrary to, the Karlin analysis.
Before us, amici support the case-by-case approach in Karlin, as contrasted to a per se rule. The briefs submitted by the MSNJ and the NJHA argue against the adoption of a per se rule banning restrictive covenants in employment contracts of physicians. The overwhelming majority of other states apply some type of reasonableness test. See Ferdinand S. Tinio,
Annotation, Validity and Construction of Contractual Restrictions On Right of Medical Practitioner to Practice, Incident to Employment Agreement, 62 A.L.R. 3d 1014 (2004)(providing expansive discussion on treatment of restrictive covenants nationwide). See also Di Dio, supra, 20 J. Legal Med. at 476-77; Berg, supra, 45 Rutgers L. Rev. at 4-5. In short, we continue to adhere to and follow the Karlin test because we conclude that it strikes the proper balance between an employer's and employee's freedom to contract on the one hand and the public interest on the other. In addition, we are convinced that the Karlin reasonableness test with emphasis on the public interest, is sufficiently flexible to account for varying factual patterns that may arise.
IV.
We turn now to apply the principles of Karlin that are "now known as the Solari/Whitmyer test[,] for determining whether a non-compete agreement is unreasonable and therefore unenforceable." Maw v. Advanced Clinical Communications, Inc., 179 N.J. 439, 447 (2004). That test requires us to determine whether (1) the restrictive covenant was necessary to protect the employer's legitimate interests in enforcement, (2) whether it would cause undue hardship to the employee, and (3) whether it would be injurious to the public. Karlin, supra, 77 N.J. at 417. Depending upon the results of that analysis, the restrictive covenant may be disregarded or given complete or partial enforcement to the extent reasonable under the circumstances. Whitmyer, supra, 58 N.J. at 32.
A.
The first prong of the test requires us to consider whether the covenant protect
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