non-competes

New Jersey employees currently restricted by non-competes are often faced with the choice – resign and be prohibited from working in their chosen industry, or stay in a job that isn’t right for them. The industry either loses a valuable, often highly experienced, individual or the employer creates a ‘trapped workforce’, building resentment and losing productivity. If litigation ensues as a result of an employee working for a company in violation of the non-compete agreement, the employee will need a significant amount of money they simply do not have to fight the case. And even if they can afford the high costs of litigation, there is never a guarantee the litigation will result in their ability to take a new job or remain in his or her new employment.

Often the terms of a non-compete can seem confusing and overbroad, leaving employees asking “how can I ever leave for a better job?”. Some non-competes bar the employee from working in the same industry for a long period of time, and/or working for a competitor within a wide geographic area. Those ready to leave their jobs can consult an attorney to find out if these terms are really enforceable.

New Jersey courts analyze the enforcement of a non-compete agreement using three factors, all of which must be met in order for an employer to succeed in enforcement; it must (1) protect the legitimate interests of the employer; (2) not impose an undue hardship on the employee; and (3) not be injurious to the public. The Court’s inquiry into these factors is fact specific to the employee, the employer, the new employer and the relationships amongst each other.

New Jersey employees may soon find new freedom in the job market. On October 3, 2022, the New Jersey State Assembly held a hearing on Bill No. 3715, backed by the National Employment Lawyers Association of New Jersey (“NELA NJ”). If passed, the Bill would prevent employers from placing unreasonable limits on their workers when they leave for new employment. For New Jersey employees, this would mean more transparency in employment contracts and fewer restrictions on their ability to seek competitive employment opportunities.

Restrictive covenants, more commonly known as “non-competes,” allow employers to prevent skilled employees from seeking new employment opportunities using the skills and knowledge they rely on in their current employment. Some restrictive covenants, such as trade secret and non-solicitation agreements, are critical to a business’ survival, and would still be permitted under the new Bill. While they can serve a valuable purpose to employers, they can be easily abused to limit employment prospects for employees who want to leave a company.

Assembly Bill (No.3715), first introduced in May 2022, addresses how restrictive covenants in employment contracts and severance agreements “discourage innovation and production” by driving skilled workers to other states and “impede the development of business.” More significantly, non-competes place an undue burden on skilled employees that limit their employment.

Articles Tagged with non-competes

The Harmful Effects of Non Competes in New Jersey

New Jersey State Assembly Considers Expanding Non-Compete Restrictions