On appeal from Superior Court of New Jersey, Chancery Division, Monmouth County, C-274-03.
Before Judges Newman, Axelrad and Bilder.
The opinion of the court was delivered by: Bilder, J.A.D. (retired and temporarily assigned on recall).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 8, 2004
The issue on this appeal is the enforceability of a restrictive covenant in an employment contract for professional services by a licensed psychologist. Plaintiff Comprehensive Psychology Systems, P.C., a corporation which provides professional neuropsychological service to individuals under the trade name LifeSpan, appeals from an order of the Chancery Division which denied its application to enforce a restrictive covenant limiting the ability of a former employee, defendant Brett Prince, Ph.D, from practicing his profession within ten miles of plaintiff's facility and from soliciting any of plaintiff's patients.*fn1
The clause at issue reads as follows:
(a) Restrictions. During the term of and for two years following the termination of this Agreement, Dr. Prince shall not solicit any patient of LifeSpan nor solicit referrals from any referral source of LifeSpan, nor without approval remove any property including patient charts from the offices of LifeSpan, nor employ any employee of LifeSpan who has been employed by LifeSpan during the term of this Agreement.
(b) During the term of this agreement, in the event of termination, then for a period of two (2) years from date of termination, Dr. Prince shall not practice within a ten (10) mile radius of any facility or office location of LifeSpan existing at the time of termination and at any hospital utilized by LifeSpan. The parties acknowledge that this geographic area constitutes the geographical area in which LifeSpan's patients and sources of referral reside or maintain their offices.
The trial judge refused to restrain Dr. Prince from contacting any patients or contacting referral sources because he deemed the enforceability of these restrictions barred by N.J.A.C. 13:42-10.16, a provision of the rules adopted by the Board of Psychological Examiners. The provision reads as follows:
A licensee shall not participate in offering or making a partnership or employment agreement that restricts the right of a licensed health care professional to practice the licensed profession after termination of the relationship, except an agreement concerning benefits upon retirement.
On appeal plaintiff contends the trial judge misconstrued the regulation --- that properly interpreted the language permits the type of non-competitive arrangement defendant entered into with plaintiff. Alternatively, plaintiff contends that the regulation was amended effective April 5, 2004, and in its present form clearly permits such non-competitive agreements. In its present form it reads:
A licensee shall not enter into any business agreement that interferes with or restricts the ability of a client to see or continue to see his or her therapist of choice.
Karlin v. Weinberg, 77 N.J. 408 (1978), rejecting a per se rule of unenforceability, held that restrictive covenants ancillary to 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. Id. at 411-412. Although defendant is not technically a physician, plaintiff contends the principles ...