On appeal from the Superior Court, Appellate Division, whose opinion is reported at 359 N.J. Super. 420 (2003).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
Karol Maw began working for Advanced Clinical Communications, Inc. (ACCI) as a graphic designer on November 1, 1997. ACCI provides marketing and educational services for the pharmaceutical and healthcare industries. Maw had been hired to design written materials used by ACCI in its marketing and educational programs.
Maw was promoted to Senior Graphic Designer in January 2001. Thereafter, pursuant to a new company policy, ACCI required all of its employees at or above the level of "coordinator" to sign a non-compete agreement as a condition of continuing employment. The agreement precluded, among other things, Maw from becoming employed by any competitor or customer of ACCI for a period of two years following the termination of her employment. Maw was informed that she could seek legal advice concerning the employment agreement. Maw consulted her father, an attorney, who suggested changes. Maw presented those revisions to ACCI's Human Resource Department but was told that no changes could be made. Maw did not sign the non-compete agreement, prompting her termination by ACCI in March 2001 for failing to comply with company policy.
Maw brought a claim under both the Conscientious Employee Protection Act (CEPA) and the common law for wrongful termination in violation of public policy. Maw claimed that ACCI committed impermissible retaliatory action when it terminated her employment because she refused to sign the agreement, which she believed to be contrary to public policy.
ACCI moved before the Law Division to dismiss the complaint for failure to state a claim for which relief can be granted. On February 14, 2002, the Law Division granted ACCI's motion, finding that the complaint failed to assert a sufficient public-policy interest within the meaning of CEPA and, similarly, lacked the requisite showing to state a claim under the common law.
A majority of the Appellate Division reversed, finding that the Law Division erred in concluding that, as a matter of law, Maw did not demonstrate a violation of public policy necessary to sustain a cause of action. The court held that the dismissal of Maw's claims before she had an opportunity to develop her case through discovery was premature. The majority panel also reinstated Maw's common-law claim for wrongful discharge in violation of public policy. One judge dissented, concluding that the Law Division did not err in dismissing Maw's claims because an employee's interest in freely moving from employer to employer is primarily a private interest beyond the protections of CEPA. The dissent found no clear mandate of public policy at issue and, therefore, concluded that Maw failed to state a claim under CEPA or the common law.
ACCI appealed as of right to the Supreme Court based on the dissent in the Appellate Division.
HELD: Maw's private dispute over the terms of the do-not-compete provision in her employment agreement does not implicate a violation of a clear mandate of public policy as contemplated by Section 3c(3) of CEPA.
1. The Court disagrees with and reverses the judgment of the Appellate Division substantially for the reasons expressed by the dissenting member of the appellate panel. The Court provides additional explanation of its conclusion that Maw has failed to state a cause of action under CEPA. (P. 2)
2. CEPA prohibits an employer from taking retaliatory action against an employee who "objects to, or refuses to participate in any activity, policy or practice which the employee reasonably believesàis incompatible with a clear mandate of public policy concerning public health, safety or welfare or protection of the environment. N.J.S.A. 34:19-3c(3) (Section 3c(3)). The Court must for the first time determine the contours and scope of a "clear mandate" sufficient to assert a claim under Section 3c(3) of CEPA. (Pp. 2-3)
3. The reference in Section 3c(3) to "clear mandate of public policy" conveys a legislative preference for conduct recognized to be in the public interest. A clear mandate of public policy suggests an analog to a constitutional provision, statute, and rule or regulation promulgated pursuant to law such that, under Section 3c(3), there should be a high degree of public certitude in respect of acceptable v. unacceptable conduct. Legislative intention concerning a clear "mandate" of public policy demonstrates a desire not to devolve into arguments between employers and employees over what is, or is not, correct public policy. The Court reaffirms the limiting principle enunciated in Mehlman that the complained of activity must have public ramifications and that the dispute between employer and employee must be more than a private disagreement. (Pp. 3-5)
4. Maw's dispute with ACCI is private in nature because the true dispute is over the terms of the non-compete agreement. Maw's CEPA claim also must fail because the State's public policy concerning non-compete agreements is not set forth in a "clear mandate" and does not concern the public health, safety or welfare or protection of the environment. Do-not-compete provisions are not per se illegal; therefore it is inaccurate to describe current case law, which allows enforcement of reasonable non-compete agreements, as a "clear mandate" that disfavors such agreements. The application of the Solari/Whitmyer test to this case does not evoke the type of "clear mandate of public policy" that was contemplated by Section 3c(3). (Pp. 5-8)
5. If unable to negotiate acceptable terms, Maw is free to dispute the reasonableness of those terms and then ACCI would have the opportunity to try to enforce those terms through litigation. What the Court will not do is alter the traditional contract remedies available in restrictive-covenant litigation by recasting this dispute as a CEPA action. (Pp. 8-9)
Judgment of the Appellate Division is REVERSED.
JUSTICE ZAZZALI, dissenting, in which JUSTICE LONG joins, is of the view that Maw has set forth allegations in her complaint that state a claim for wrongful termination under both CEPA and the common law. There exists in this State a clear mandate that overly restrictive non-compete agreements violate public policy. Because ACCI has not and could not demonstrate that its non-compete agreement is reasonable, Justice Zazzali would affirm the decision of the Appellate Division.
CHIEF JUSTICE PORITZ and JUSTICES VERNIERO, LaVECCHIA, and WALLACE join in this PER CURIAM opinion. JUSTICE ZAZZALI filed a separate dissenting opinion, in which JUSTICE LONG joins. JUSTICE ALBIN did not participate.
Plaintiff, Karol Maw, filed this action under the Conscientious Employment Protection Act, N.J.S.A. 34:19-1 to -8 (CEPA), after she was terminated for refusing to execute an employment agreement containing a do-not-compete provision. She claimed that her employer committed impermissible retaliatory action when it terminated her employment because she refused to sign an employment agreement that she perceived to be contrary to public policy. We disagree and reverse the judgment of the Appellate Division, substantially for the reasons expressed in the cogent dissent by Judge Cuff. Maw v. Advanced Clinical Communications, Inc., 359 N.J. Super. 420, 442-48 (App. Div. 2003) (Cuff, J.A.D., dissenting). Briefly, we add the following in explanation of our conclusion that plaintiff has failed to present a cause of action under CEPA.
CEPA prohibits an employer from taking retaliatory action against an employee who "objects to, or refuses to participate in any activity, policy or practice which the employee reasonably believes... is incompatible with a clear mandate of public policy concerning public health, safety or welfare or protection of the environment." N.J.S.A. 34:19-3c(3) (Section 3c(3)). In this case we confront for the first time a question as to the meaning of the phrase "clear mandate of public policy." More specifically, we must determine the contours and scope of a "clear mandate" sufficient to assert a claim under Section 3c(3). We begin with the observation that a public policy expressed in the form of a statute, rule or regulation promulgated pursuant to law, is not what was meant under Section 3c(3). To so hold would reduce N.J.S.A. 34:19-3c(1) (Section 3c(1)) to mere surplusage, since it employs those legal precepts as a frame of reference for evaluating an employer's conduct.
That said, Section 3c(1) is helpful in resolving the question before us. Like Section 3c(1), the reference in Section 3c(3) to a "clear mandate of public policy" conveys a legislative preference for a readily discernable course of action that is recognized to be in the public interest. A "clear mandate" of public policy suggests an analog to a constitutional provision, statute, and rule or regulation promulgated pursuant to law such that, under Section 3c(3), there should be a high degree of public certitude in respect of acceptable verses unacceptable conduct. Indeed, prior decisions involving CEPA claims have reasoned similarly when discussing Section 3c(3) claims. E.g., Higgins v. Pascack Valley Hosp., 158 N.J. 404, 420 (1999) (citing Mehlman v. Mobil Oil Corp., 153 N.J. 163, 189-90 (1998) (finding that CEPA "prohibits employer retaliation against an employee who objects to an employer practice that violates a foreign country's public policy, as expressed in an industry safety guideline")). The legislative approach vis-à-vis a "clear" mandate of public policy bespeaks a desire not to have CEPA actions devolve into arguments between employees and employers over what is, and is not, correct public policy. Such an approach also fits with the legislative requirement of a "mandate" as opposed to a less rigorous standard for the type of public policy that is implicated.
The dissent below is in accord with our analysis in respect of its discussion of both the purpose of CEPA, Maw, supra, 359 N.J. Super. at 444-446 (Cuff, J.A.D., dissenting), and our precedent construing CEPA. Id. at 446-47. Judge Cuff's summary of CEPA's purpose echoes our observation last term that "[t]he Legislature enacted CEPA to 'protect and encourage employees to report illegal or unethical workplace activities and to discourage public and private sector employers from engaging in such conduct.'" Dzwonar v. McDevitt, 177 N.J. 451, 461 (2003) (quoting Abbamont v. Piscataway Twp. Bd. of Educ., 138 N.J. 405, 431 (1994)). As stated in Dzwonar, supra, CEPA is designed to "'prevent retaliation against those employees who object to employer conduct that they reasonably believe to be unlawful or indisputably dangerous to the public health, safety or welfare.'" 177 N.J. at 464 (quoting Mehlman v. Mobil Oil Corp., 153 N.J. 163, 193-94 (1998) (emphasis added)). The dissent found "that a helpful limiting principle [for CEPA claims] is that the offensive conduct must implicate the public interest." Maw, supra, 359 N.J. Super. at 446 (Cuff, J.A.D., dissenting) (citing Mehlman, supra, 153 N.J. at 187-88). "[T]he offensive activity must pose a threat of public harm, not merely private harm or harm only to the aggrieved employee." Mehlman, supra, 153 N.J. at 188. We reaffirm the limiting principle enunciated in Mehlman that the complained of activity must have public ramifications, and that the dispute between employer and employee must be more than a private disagreement.
In this matter, plaintiff's dispute with her employer is private in nature. Plaintiff concedes that she possessed confidential and proprietary information, and that she had no objection to those portions of the non-compete agreement that would preclude her from sharing such information with future employers. In other words, plaintiff's true dispute was over the reasonableness of the terms of the non-compete agreement, an argument she was free to make if and when her employer tried to prevent her from working at another company. It is telling that plaintiff uniformly refers to the effect that signing the non-compete agreement would have on "her ability to find employment in her field," and that "she believed that there was no legitimate business reason for defendants to require ...