A covenant not to compete is unreasonable and, thus, is not enforced after a factual inquiry if: (1) if the restraint is greater than necessary to protect the employer's legitimate interest, or (2) if that interest is outweighed by the hardship to the employee and the likely injury to the public.
A doctor, an internist and pulmonologist entered into an employment agreement with an employer that contained a restrictive covenant not to compete. After the doctor left the practice and began practicing within the area defined by the restrictive covenant, the ex-employer sued the doctor based on the restrictive covenant not to compete. The trial court denied ex-employers preliminary injunction request and held that the covenant violated public policy, or alternatively, was unenforceable because it was too broad. The appellate court reversed and held that the restrictive covenant was reasonable. The case was appealed to the Supreme Court of Arizona.
Was the restrictive covenant reasonable?
The court held that the covenant was unenforceable because plaintiff failed to prove that its interests outweighed public policy interests. The court stated that because the doctor-patient relationship was special, it was entitled to unique protection. Furthermore, based on public policy interests, covenants not to compete between physicians were to be strictly construed for reasonableness. The duration and geographic scope of the restrictive covenant were unreasonable. The trial court's opinion was affirmed, and the appellate court opinion was vacated and remanded.