While it is encouraging that the Legislative Assembly is considering this bill, similar legislative proposals have not received sufficient legislative support to pass. Without the passage of comprehensive non-competition law reform, many New Jersey employees will continue to be discouraged, both legally and practically, from seeking opportunities for advancement in other companies. As the current non-compete framework favours employers, especially employers who have the resources to outperform their former employees in costly litigation, it is almost never necessary to adopt these much-needed reforms to create a level playing field for workers. Our labour lawyers will continue to monitor and report on this bill if it comes into force. In recent years, more and more employers have required their employees to sign non-compete obligations as a condition of employment. Estimates indicate up to 20% of the United States. The workforce is subject to these requirements, with 50% of private sector employers using them at some level. Non-compete obligations serve a variety of purposes, ranging from restricting the future location of employment to preventing employees from competing with their former businesses after they leave. While non-compete obligations may be beneficial to employers, not all non-compete obligations are enforceable. This article discusses the different elements of a non-compete obligation and what makes it enforceable in New Jersey. New Jersey courts are used to enforcing clauses that are clear at first glance. Therefore, employers should ensure that their non-compete obligations are clear, unambiguous and written in plain language, rather than confusing legal language. DISCLAIMER: Due to the generality of this update, the information contained in this document may not be applicable in all situations and should not be implemented without specific legal advice based on certain situations.
A common misconception among many is that a New Jersey employer cannot enforce a non-compete clause that an employee has entered into in consideration of their employment. While many employers do not attempt to enforce a non-compete obligation because of the cost and commercial necessity of engaging in such litigation, the courts actually enforce non-compete obligations if the employer can meet the required legal standards. If you would like more information about this article or would like to discuss your legal case, please contact me at pl@pjlesq.com or (201) 904-2211. We have hundreds of podcasts and videos on a variety of business and legal topics. I look forward to answering any questions you may have. Disclaimer: The content of this website and article is intended solely to provide general information and not to provide legal advice or opinions. The content of this website and the publication and display of information on this website should not be construed as legal or tax advice in certain circumstances or in any particular situation and should not be considered as such. Nothing on this website is an offer to represent you, and nothing on this website is intended to establish an attorney-client relationship. An attorney-client relationship can only be established through direct communication between the lawyer and the client, which is confirmed by the conclusion of an order contract.
Example 1: During the period of employment and for a period of two years from the date of termination of employment, the Executive shall not own, directly or indirectly, within a radius of fifty miles, an office of the employer (or a consolidated subsidiary) existing on the date of termination of employment, work for the company, consult, an officer or a board administrator, Represent, carry on or carry on a business that competes with the employer`s business. During the period of employment and for a period of two years after the date of termination of employment, management will not solicit, induce or attempt, directly or indirectly, to solicit or attempt to request or cause any employee of the employer (or any consolidated subsidiary) to leave the employer (or any consolidated subsidiary) for any reason; or use the services of an employee of the employer (or a consolidated subsidiary). While the A3715 would radically change the landscape of restrictive agreements in New Jersey, it does not apply retroactively and has no effect on an agreement that was in effect prior to the effective date. Whether or not the law is signed in its current form, New Jersey employers should expect to face increasing scrutiny in the state in the future regarding the use of non-compete obligations and other restrictive agreements. Example 2: During the term of the Consultant`s engagement and for a period of six (6) months immediately after the termination or expiration of his assignment, the Consultant may not directly or indirectly (i) engage in any business or activity that directly or indirectly competes with the Company within a radius of fifty (50) miles from the Company`s current location in Austin; Texas, (ii) to request or induce any employee or consultant of the Company to terminate their employment relationship or cease doing business with the Company, or (iii) to recruit an actual or potential client of the Company for a business that is in direct or indirect competition with the Company, unless the consultant is expressly authorized to do so (i), (ii) or (iii) with the prior written consent of the Company. The Consultant acknowledges that the limitations set forth in this Section 4 are appropriate and necessary for the proper performance of its advisory functions. Although restrictive agreements are common in contracts between employers and their independent contractors, the A3715 prohibits the application of restrictive agreements against independent contractors. New Jersey courts have ruled that the employer does not need to prove actual financial or economic harm to enforce a valid and enforceable restrictive agreement. Therefore, it is extremely important to speak to an experienced non-compete attorney in New Jersey before signing a non-compete agreement or other restrictive agreement. Our lawyers can advise you on the risks of signing the agreement and help you negotiate more reasonable terms. In 2021, the national trend continued, with Washington DC, Oregon, and Illinois all passing laws that tightened restrictions on the applicability of restrictive agreements. By 2022, Colorado has already passed one of the strictest restrictions in the country, and now New Jersey looks set to join those ranks.
In New York and New Jersey, non-compete obligations are designed to protect the employer`s trade secrets and confidential information and give the company time to recruit and train a replacement. But in practice, they also limit the employee`s ability to find another job, negotiate a raise with their current employer, or earn a living. What may be most shocking to employers if the law is passed in its current form, an employer would have to pay the employee 100% of the remuneration he would have received for work that would have been done during the limited period. This means that New Jersey employers would be required to continue to pay an employee their full salary and benefits for up to 12 months after the termination of employment (depending on the time of the restrictive agreement). Similar to other state laws, the bill also includes a requirement to terminate employment at the beginning. An employer must disclose the terms of a non-compete obligation in writing to potential employees before the earlier of the dates of the formal offer of employment or thirty working days before the employee begins employment. For contracts concluded after the start of the employment relationship, a similar notice period of 30 days applies. To be valid, the agreement must be signed by both the employer and the employee and explicitly states that the employee has the right to consult a lawyer before signing.
