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Non-Compete and Non-Solicitation Clauses: Why Restrictive Covenants are Uniquely Prohibited from Inclusion in Psychologist Employment Agreements

By: Cristina N. Hyde, JD

Entering an employment contract can be stressful; especially for health care professionals where restrictive covenants are involved. Generally, such restrictions in employment contracts are permissible.  However, in New Jersey, psychologists are a unique subset of health care providers who are prohibited from having non-compete or non-solicitation clauses in their employment agreements. Psychologist employment agreements are regarded differently for two reasons.

First, the non-compete and non-solicitation language in psychologist employment agreements is prohibited by regulation.  Non-compete agreements for psychologists who are licensed by the New Jersey Board of Psychological Examiners are governed by N.J.A.C. 13:42-10.16 .  It states that a licensed psychologist “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.”

Second, precedent has interpreted the limitations created by non-competes in the patient-psychologist relationship to be harmful to the patient.  In the case of Comprehensive Psychology Systems, PC v. Prince ,  the New Jersey Appellate Court determined that even absent a governing regulation, the a non-compete or non-solicitation provision in a psychologist’s employment contract would be unenforceable.

In reaching its conclusion, the Court explained that a non-compete agreement is enforceable if it protects the legitimate interests of the employer, does not impose undue hardship on the employee, and is not injurious to the public. It then went on to reason that the limiting language did not take the “nature of the practice of psychology and the uniquely personal patient-psychologist relationship” into consideration, expressing concerns with the interference with an ongoing course of treatment.  Thus, the Court stated that a psychologist who changes his office location, voluntarily or involuntarily, has a duty to inform patients of the change, placing significant weight on the consideration of the rights of the patient.

While this ruling is specific to psychologist employment contracts, it also emphasizes the fact-sensitive nature of contract interpretation and the importance of seeking attorney review.  If you are a party to a contract containing restrictive covenants and have questions, Campanella Law Office is ready to help.  Contact Us.

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