When starting a job with a new employer or while already working for one, many people have been faced with having to sign an employment agreement containing a non-compete or restrictive covenant clause. These provisions impose post-employment restrictions on individuals. For example, the clause often states that in the event of a voluntary or involuntary termination of employment, the employee will not compete with the former employer’s business activities for a specified time period and within a specific geographical region. Individuals are often banned from working for a competitor, starting a business in the same field, or working with the employers’ vendors, clients, and/or customers. Employers use non-compete clauses to protect their proprietary information and other business interests, but at times the restrictions are too broad in scope and unreasonable.
Non-competes are now under scrutiny chiefly because they can hinder—sometimes unfairly and severely– a person’s ability to secure employment in their field or otherwise pursue career opportunities if the individual loses his or her job. In the past, non-competes were primarily included in senior and executive employment agreements. Today, non-competes are common for workers across all occupation, wage and education levels.
Last May, the New Jersey Assembly Labor Committee approved Assembly Bill A1769. If passed, this Bill would curtail non-competes to ensure that they are reasonable in scope while protecting the employer’s legitimate business interests and trade secrets. Under this Bill, non-competes would be considered unenforceable against an employee who worked for the employer for less than one year or who was “terminated without good cause or laid off by action of the employer.” If the employee was not terminated for good cause, the Bill would compel employers to continue to pay that former employee during the term of the non-compete.
If Bill A1769 passes and becomes law, New Jersey will join other states, such as California, Utah, Idaho, and Massachusetts that have recent laws either banning non-compete agreements in all but a few circumstances or regulating the use and enforcement of non-compete agreements in the private sector. As the pending bill in New Jersey will undoubtedly have a significant impact on workers’ post-employment activities, all eyes should monitor the Bill and this thorny legal issue.
For more information on the enforcement of non-compete and other post-employment restriction agreements or any New Jersey employment law issue, contact me.
Date: February 2, 2019
Author: Jessica S. Allen, Counsel
Practice Area Center: Employment Law