Cengage Advantage Books: Business Law Today, The Essentials 10th Edition by Roger LeRoy Miller

تمرين 21

Emerick v. Cardiac Study Center, Inc.
FACTS Cardiac Study Center, Inc., is a medical practice group of approximately fifteen cardiologists. In 2002, Cardiac hired Dr. Robert Emerick as an employee. In 2004, Emerick became a shareholder of Cardiac. He signed a shareholder employment agreement that included a covenant not to compete. The covenant stated that a physician who left the group promised not to practice competitively in the surrounding area for a period of five years. In 2005, patients and other medical providers began to complain to Cardiac about Emerick's conduct. Some physicians stopped referring patients to Cardiac as a result. Finally, Cardiac terminated Emerick's employment in 2009. Emerick sued Cardiac, seeking a declaration that the covenant not to compete was unenforceable. He prevailed at trial, and Cardiac appealed.
ISSUE Was the Cardiac Study Center's covenant not to compete unenforceable?
DECISION No. The state appellate court held that the covenant not to compete was reasonable.
REASON The reviewing court examined the reasonableness of the covenant not to compete in terms of how it protected the employer's business or goodwill. The court pointed out that "an employee who joins an established business gains access to his employer's customers and acquires valuable information as to the nature and character of the business." Further, an employer has a "legitimate interest in protecting its existing client base and prohibiting the employee from taking its clients." Cardiac had provided Emerick with an immediate client base and established referral sources when he moved to the area. Emerick had access to Cardiac's business model and goodwill. The reviewing court explained that "restrictive covenants are common among professionals because they allow a new professional to step into an already established practice while protecting the employer from future competition."
WHY IS THIS CASE IMPORTANT? If businesspersons create restrictive covenants that are reasonable, do not extend to a very large geographic area, and do not last for decades, courts will often hold them enforceable. Without the protection of restrictive covenants, businesses would be less willing to hire employees and give them access to client lists and unique business models.