In the recent Appellate Division decision in Karol Maw v. Advanced Clinical Communications, Inc., et al. (Appellate Division Docket No. A-3606-01T3) (April 16, 2003), the court appears to have dramatically expanded the scope of the New Jersey Conscientious Employee Protection Act ("CEPA") N.J.S.A. 34:19-1, and may have created a significant problem for employers that generally require the execution of restrictive covenants by their employees.
In Maw, a non-executive level employee was required to execute a non-compete agreement that effectively barred her from working in the same industry as her employer for a period of two years following the termination of her employment. The employer provides marketing and educational services for the pharmaceutical and healthcare industries. The employee, Karol Maw, was a graphics designer for the company. The employer required Maw and other, non-executive level employees to execute the two-year, non-competition agreements as part of their continued employment. Maw refused to execute the agreement and was fired. Maw claims her firing was in retaliation for her refusal to sign the agreement.
In an unusual decision, the Appellate Division found that the restrictive covenant may violate public policy, and that Maw may have been fired in retaliation for refusing to execute a document which may be in violation of public policy against restraint of trade. The court held that Maw was entitled to further discovery on this issues, and inferred that if the non-competition agreement was found to be an illegal restraint of trade, then Maw's firing would constitute a CEPA violation.
The lone dissenter on the Panel balked at this logic, agreeing with the trial judge that no retaliation had been made for blowing the whistle on a "clear mandate of public policy." The dissent seemed to argue that the employer's activity must be clearly wrongful, and pointed out that there are many legitimate, business interests that the employer could be acting to protect.
This case will likely be appealed to the State Supreme Court, since it represents a radical expansion of the scope of protection offered by the CEPA. Additionally, this decision may have a chilling effect upon the recent, widespread use of restrict covenants by employers.