Restrictive Covenant Enforcement Memo Essay Example For Students

Restrictive Covenant Enforcement Memo Essay Closed Memo Rewrite Rajvir Goomer Professor Nardone’s Section Submitted: 2/10/09 TO: Stacy Warner, Esq. FROM: Rajvir Goomer RE: Dr. Lisa Cuddy Restrictive Employment Covenant DATE: February 10, 2009 Facts: Dr. James Wilson owns Pediatric Place in Princeton, Iowa. Many of Dr. Wilson’s patients were adolescent girls who wanted a female physician. Dr. Lisa Cuddy was hired by Dr. Wilson to work at Pediatric Place in April 2007. Dr. Cuddy was required to sign a twenty five mile, five year restrictive covenant. A full time assistant was the only other employee at that time. Dr. Cuddy had full access to all patient files and became acquainted with many of her patients’ parents. Dr. Cuddy resigned on November 21, 2008 and joined Davenport Pediatrics in Davenport, Iowa as a full-time pediatrician. Davenport Pediatrics was twenty-three miles from the Pediatric Place. Dr. Cuddy did not solicit any of her former patients, however, Davenport Pediatrics advertised her employment and she provided medical care to three of her former patients that saw the newspaper ad. Dr. Cuddy’s sole source of income was her employment as a pediatrician. Dr. Cuddy received a complaint filed by Dr. Wilson in Iowa District Court on December 23, 2008. Question Presented: Whether a five year restriction in a restrictive employment covenant is enforceable. Short Answer: No. Courts have enforced restrictive covenants but have modified them to shorten the term to two to three years. Discussion: Dr. Wilson filed a complaint against Dr. Cuddy for violation of the restrictive covenant she signed when under his employment. Whether a time restriction in a restrictive covenant is enforceable the court considers: â€Å"(1) Is the restriction reasonably necessary for the protection of the employer’s business; (2) is it unreasonably restrictive of the 1 Goomer employee’s rights and (3) is it prejudicial to the public interest? † Phone Connection, Inc. v. Harbst, 494 N. W. 2d 445, 449 (Iowa Ct. App. 1992). The court will generally enforce two to three year restrictive covenants. First, a time restriction is reasonably necessary to protect an employer’s business hen the employee has â€Å"direct personal exposure to the company’s customers and supplies. † Phone Connection, 494 N. W. 2d at 449. In Phone Connection, the employee was one of three principal employees and therefore had close interaction with most of the company’s clients. Id. at 450. The court enforced a restrictive covenant modified from five to two years. Id. â€Å"Where the court finds a covenan t unduly restrictive, the court has the authority to modify that covenant. † Id. at 449. In Dental E. , P. C. v. Westercamp, the employee â€Å"obtained access to the names of Dental East’s patients, its methods of operation and its business techniques. † 423 N. W. 2d 553, 555 (Iowa Ct. App. 1988). The employees agreed that â€Å"neither by public nor private communications, contact or inform patients of record at Dental East. † Id. at 554. The court stated that it was reasonable to expect some of the employees customers to follow him to his new employment. Id. at 555. The court in Dental E. enforced a two year estrictive covenant but also noted that, â€Å"the restriction on the employee must be no greater than necessary to protect the employer. † Id. (quoting Iowa Glass Depot, Inc. v. Jindrich, 338 N. W. 2d 376, 381 (Iowa 1983)). Similar to the above cases, Dr. Cuddy had complete access to all patient files and came to know the parents of many of her patients. She also was one of only two employees and did not directly solicit any of her former patients. In s imilar cases, the court has enforced more reasonable two to three year restrictive covenants to protect the employer’s business. Goomer Also, â€Å" covenant must not be oppressive or create hardships on the employee out of proportion to the benefits the employer may be expected to gain. † Dental E. , 423 N. W. 2d at 555 (quoting Iowa Glass Depot, Inc. , 338 N. W. 2d at 381). In Dental E. , the court found that nothing in the restrictive covenant prevented the employee from practicing dentistry. Id. at 555. In Phone Connection, the former employee had his livelihood tied to one specific business and had difficulty in working outside of the restrictive covenant due to his large family. 94 N. W. 2d at 449. Therefore, the employee â€Å"would be unreasonably restricted by the covenant’s time and geographical limitations. † Id. The court decided that a reduced restrictive covenant of two years â€Å"does not pose an unnecessary or unreasonable hardship . . . .† Id. Dr. Cuddy similarly has a specialized skill. However, even if she had difficulty working outside of the restrictive covenant, the court would still enforce a modified two year covenant. Finally, the restrictive covenant cannot be â€Å"prejudicial to the public interest†. 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In Phone Connection, the restrictive covenant was not prejudicial to the public interest because the same services could be obtained from other companies in the area. Therefore, restricting competition from the former employee would not be harmful. Id. Dr. Cuddy was hired initially because there was a demand for a female physician. Dr. Cuddy could argue that the restrictive covenant would create a void for services to adolescent girls in the area. The court would probably enforce a modified restrictive covenant of two to three years. 3 Goomer