Bd. of Regents v. Warren - No. 08-0017, 2008 Iowa App. LEXIS 1192 (Ct. App. Nov. 26, 2008)

Rule:

To determine whether a restrictive covenant in an employment contract is enforceable, a court considers: (1) whether the restriction is reasonably necessary for the protection of the employer's business; (2) whether it is unreasonably restrictive of the employee's rights; and (3) whether it is prejudicial to the public interest. The restriction must be no greater than that necessary to protect the employer. Essentially, these rules require a court to apply a reasonableness standard in maintaining a proper balance between the interests of the employer and the employee. The facts and circumstances of each individual case must be carefully considered to determine whether a restrictive covenant is reasonable. The validity of the contract in each case must be determined on its own facts and a reasonable balance must be maintained between the interests of the employer and employee.

Facts:

In accepting employment with the university, the doctor signed a non-compete agreement that precluded him from practicing medicine within a 50-mile radius for two years if he terminated his employment. When the university cut off funding for his research, the doctor resigned his position and accepted employment within 50 miles of the university. The university filed suit seeking an injunction to prohibit the doctor from practicing medicine in violation of the non-compete agreement. The district court declined to enforce the non-compete agreement, holding that the university failed to meet its burden to show that an injunction was required. The university appealed. 

Issue:

Under the circumstances, should the non-compete agreement be enforced, thereby warranting the grant of injunction in favor of the university?  

Answer:

No.

Conclusion:

On review of the district court's decision denying the request for injunctive relief, the court held that enforcement of the non-compete agreement would not be reasonable because the university failed to show that enforcement was necessary to protect its business. The court noted that the doctor spent 80 percent of his time conducting research and had little contact with patients; as such, the university failed to establish that patients were likely to seek treatment elsewhere based upon the doctor's departure. Further, the public interest in health care and the availability of treatment for cancer patients weighed heavily in favor of the non-enforcement of the non-compete agreement.