On Oct. 31, 2022, the Idaho Supreme Court published its decision in Blaskiewicz v. Spine Institute of Idaho, wherein the Court reiterated the appropriate standards for reviewing, enforcing and possibly modifying non-compete agreements. The decision also illustrated how a valid arbitration agreement alone may not shield an employer from litigation if the employer fails to timely seek arbitration or if the agreement's terms are not sufficiently robust.
On Dec. 7, 2018, Donald Blaskiewicz, M.D. (Blaskiewicz), entered into a Professional Services Agreement (PSA) with the Spine Institute of Idaho (Spine Institute), a medical treatment provider located approximately 10 miles west of Boise, Idaho. The PSA contained a non-compete clause that prohibited Blaskiewicz from practicing medicine within 50 miles of the Spine Institute’s office for a period of 18 months following the termination of his employment with the Spine Institute for any reason. (The PSA provided an explicit exception for the city of Caldwell, Idaho, located approximately 25 miles west of Boise.) Under the terms of the PSA, Blaskiewicz had two ways to avoid the non-compete clause: he could either get permission from the Spine Institute to practice medicine within the proscribed area, or he could pay the Spine Institute $350,000 in liquidated damages. The PSA also required “any disputes arising out of or related to” the PSA to be resolved by arbitration.
On April 16, 2020, the Spine Institute terminated Blaskiewicz’s employment. On May 1, 2020, Blaskiewicz filed suit, seeking to void the non-compete clause so he could accept employment with St. Luke’s Hospital System, a competitor of the Spine Institute. On his motion for summary judgment, Blaskiewicz argued, among other things, that the non-compete clause was against public policy and, therefore, unenforceable. In response, the Spine Institute argued that the Uniform Arbitration Act, codified under Idaho Code § 7-901, stripped the district court of subject-matter jurisdiction to review the non-compete clause. The Spine Institute further argued that the district court should stay the case for arbitration. However, the Spine Institute did not seek an order compelling arbitration, conceding that arbitration was premature: Blaskiewicz, at the time, had not yet taken a job with St. Luke’s or any other competitor and, therefore, had not breached the PSA. Finally, the Spine Institute also presented evidence to support its claim that the non-compete clause was reasonable.
After hearing oral argument on the matter, the district court granted Blaskiewicz’s motion for summary judgment. Concluding that it had jurisdiction to determine whether the non-compete clause was enforceable and that arbitration was premature, the district court held that the non-compete clause was against public policy and, therefore, void.
On appeal to the Idaho Supreme Court, the Spine Institute argued that the district court erred in exercising jurisdiction over the non-compete clause and that the Idaho Supreme Court should uphold the arbitration agreement and stay proceedings. The Spine Institute also asserted that it submitted an “abundance of evidence” demonstrating that the non-compete clause did not violate public policy. On the question of jurisdiction, the Court agreed with the district court’s finding. Citing to its 2009 decision in Borah v. McCandless, the Court reaffirmed that the Uniform Arbitration Act did not strip courts of jurisdiction to determine the enforceability of non-compete agreements. Regarding the arbitration clause, the Court noted that the Spine Institute had not moved to compel arbitration in the district court and, “[w]ithout such a demand for arbitration, the Spine Institute cannot now complain that this controversy should have been arbitrated.”
With regard to the district court’s grant of summary judgment, however, the Court found that the Spine Institute had presented evidence that raised a genuine issue of material fact and that the district court erred by making “a number of specific factual findings” based on “the very limited factual record.” The Court also found that the district court wholly failed to address Title 44, Chapter 27 of the Idaho Code, which governs “Agreements and Covenants Protecting Legitimate Business Interest,” and its related provisions under Idaho Code § 44-2701, which provide the following rebuttal presumptions:
· An agreement or covenant with postemployment terms of eighteen (18) months or less is reasonable as to duration;
· An agreement or covenant is reasonable as to geographic area if it is restricted to the geographic areas in which the key employee provided services or had a significant presence or influence; and
· An agreement or covenant is reasonable as to type of employment or line of business if it is limited to the type of employment or line of business conducted by the key employee while working for the employer.
The Court further noted that the district court failed to consider its power under the same statute to limit or modify overbroad provisions of non-compete agreements through blue-penciling. Based on the district courts erroneous finding of fact and the district court’s failure to address the applicability of the relevant Idaho statutes, the Idaho Supreme Court vacated the district court’s decision.
The Court’s decision in Blaskiewicz v. Spine Institute of Idaho reaffirmed the codified presumption that non-compete agreements of limited scope, duration, geographic area, and type of employment are reasonable. The decision also demonstrated how employees may be able to sidestep an arbitration agreement if the employer fails to take prompt action to enforce its terms or if the terms fail to account for certain employee conduct. An employer seeking to implement or enforce a non-compete agreement or an arbitration agreement should seek the advice of legal counsel to ensure that such agreements are reasonable and timely enforced.
Garrett Kitamura is an attorney in Parsons Behle & Latimer’s Boise office. To contact Garrett on this or related matters, call 208-562-4900 or send an email to firstname.lastname@example.org.