New Jersey Supreme Court "Blesses" Firing of Employee Who Refused to Sign Oppressive Non-Compete Agreement
June 12, 2004

In a decision that can only be described as a travesty of justice, an assault on the rights of employees throughout the State, and a judicial "blessing" of a form of indentured servitude, the New Jersey Supreme Court ruled today that an employer has the absolute right to fire any employee who refuses to sign a non-compete agreement, even if that agreement is patently unreasonable and illegally bars the employee from leaving his job to try to find better employment elsewhere.

The lawsuit at issue was initially filed in Mercer County Superior Court in August, 2001 by Karol Maw against her former employer, Advanced Clinical Communications, Inc. (ACCI) of Lambertville, New Jersey. Ms. Maw, who worked for ACCI as a graphic designer, is 42 years old, a single mother of one, and lived in New Hope, Pennsylvania at the time she worked for ACCI. In the suit, brought under New Jersey's Conscientious Employee Protection Act (CEPA), Ms. Maw alleged that her employer terminated her in violation of the public policy of the State of New Jersey when it fired her on March 15, 2001 after she refused to go along with its demand that she sign a non-compete agreement. Ms. Maw had worked for 3 and 1/2 years as a graphic designer for ACCI, a company that provides marketing and educational services to the pharmaceutical and health care industries. She was presented in January, 2001 with an Employee Agreement, and told that if she wished to keep her job, she had to sign. One of the terms of the Agreement was a Non-Compete Covenant, which, for the two years after she left her employment with ACCI, would have prohibited her from working for any companies that had been competitors or customers of the Company. When she refused to sign, she was fired.

Reversing the decision of the Appellate Division of the Superior Court, which had ruled in favor of Ms. Maw in April 2003, the New Jersey Supreme Court, in a 4- to- 2 decision, held that Ms. Maw had no right to challenge her firing, and that her employer's insistence, upon the pain of firing, that she sign a non-compete agreement that she believed to be patently unreasonable did not violate the public policy of the State of New Jersey. The majority, failing to apprehend the significant public policy issues at stake in the case, labeled the issue merely a private dispute.

In a blistering dissent to the opinion of the four justices ruling against Ms. Maw, Justice James Zazzali, joined by Justice Virginia Long, recognized how the public policy of the State of New Jersey is directly implicated by the unrestrained imposition of non-compete agreements on employees like Ms. Maw, who can now be summarily terminated for refusing to sign an unreasonable and oppressive non-compete agreement, and who will now be left with no recourse. Justice Zazzali wrote that vital public policy considerations, not merely private concerns, are implicated by the abuse of non-compete agreements:

A[n] [employee] who claims that she resisted signing an agreement that she believed to violate public policy [should not] be summarily cast out of court on the grounds that her concerns constitute only a private dispute with her employer.

In his dissent, Justice Zazzali added that the majority's decision disserves both the remedial purpose of CEPA as well as the honorable tradition of protecting the free markets of this State. He recognized that unless employees like Ms. Maw are given the right to pursue their claims in court, nothing prevents an employer from demanding that such an employee agree to the most unreasonably restrictive non-compete agreement as a condition of continuing employment [and that] should the employee refuse, today's holding allows the employer to terminate with impunity and leaves the employee but one avenue of real relief: find another job.

Finally, Justice Zazzali recognized the obvious in terrorem effect such covenants have in restricting employee mobility, explaining that, once an employee has affixed his or her signature, regardless of whether the agreement is ultimately enforced by a court, the employer has achieved its goal of trapping the employee in a job which someday he or she may wish to leave and keeping an employee from seeking alternative employment.

Plaintiff's attorneys, Richard Schall and Patricia Barasch, of the firm of Schall & Barasch in Moorestown, New Jersey, state that they see the majority's decision as a glaring injustice, one that essentially gives the court's blessing to a form of indentured servitude. They further note that, it is a sad day for the employees in the State of New Jersey, when our Supreme Court, which at one time was such a strong protector of employee rights, has now issued a decision that not only undermines the right of employees to move to better jobs, but also grievously disserves the interest of the public. They are urging the Legislature to act to undo the damage done by the Court's opinion.

A copy of the majority and dissenting opinions in the Maw case can be downloaded here. (MS Word document)