Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Are Certain Non-Compete Agreements on the Way Out in New Jersey?

Author: Scarinci Hollenbeck, LLC

Date: April 30, 2013

Key Contacts

Back

Non-compete agreements, also known as restrictive covenants, are employment contracts designed to limit the ability of an employee to compete with the employer by its stealing customers or trade secrets. Although somewhat controversial and frowned upon as being “restraints on trade,” most states permit such agreements (California is a notable exception).

Under current New Jersey law, enforceable non-compete agreements must strike a balance between protecting the employer’s legitimate business interests with the employee’s right to work in a field for which he or she is trained.  In general, courts balance these considerations by examining the type and size of the business, how long and over what geographic area the restrictions apply and whether adequate consideration or benefit, was given the employee at the time the agreement was signed.

Non-Compete Agreements

Legislation to outlaw certain types of non-compete agreements is currently pending in the New Jersey Assembly. The bill (A-3970), introduced on April 4, 2013, specifically applies to unemployment compensation.

The proposed NJ non-compete legislation would specifically invalidate any covenant, contract, or agreement not to compete, not to disclose, or not to solicit, entered into by an individual with the individual’s most recent employer, if the individual is found to be eligible for unemployment insurance benefits pursuant to New Jersey’s unemployment compensation law (N.J.S.A.43:21-1 et seq.)  What is surprising is that non-solicitation and confidentiality restrictions are universally recognized as protecting the legitimate interests of employers.

Being eligible for unemployment benefits as a qualification is not exactly a “high bar” as New Jersey is considered one of the most liberal, give-away states when it comes to unemployment eligibility determinations.  The bill does stipulate that the provisions of the bill will not apply to any covenant, contract, or agreement in effect on or before the date of the bill’s enactment.  This will have only a limited duration as a qualification, however.

Although it is unclear if this legislation will advance, it appears to have some support in both the Assembly and the Senate. Therefore, New Jersey companies should keep it on their radar. Since the bill would not apply retroactively, it may be necessary to execute agreements in advance of the law’s effective date.  Even better, employers should contact their legislative representatives and let them know that they oppose this change.

If you have any questions about the proposed legislation or how it may impact your operations, please contact me, Gary Young, or the Scarinci Hollenbeck attorney with whom you work. 

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Breaking Down New Jersey’s “Mansion” Tax: What Buyers and Sellers Need to Know post image

Breaking Down New Jersey’s “Mansion” Tax: What Buyers and Sellers Need to Know

For many years, the New Jersey Mansion Tax has been a significant consideration in high-value real estate transactions. Recent legislative changes, however, have substantially altered how the tax operates, including who is responsible for paying it and the amount owed in certain transactions. Whether you are purchasing, selling, or investing in New Jersey real estate, […]

Author: George McGowan

Link to post with title - "Breaking Down New Jersey’s “Mansion” Tax: What Buyers and Sellers Need to Know"
Estate Planning for Digital Assets Under New Jersey Law post image

Estate Planning for Digital Assets Under New Jersey Law

As our personal and financial lives increasingly move online, estate planning must evolve to address a new category of property: digital assets. From email accounts and social media profiles to cryptocurrency and cloud-stored business records, these assets often carry both financial and sentimental value. Yet, without proper planning, they can become inaccessible—or even lost—upon incapacity […]

Author: Marc J. Comer

Link to post with title - "Estate Planning for Digital Assets Under New Jersey Law"
The Role of Representation and Warranty Insurance in M&A Transactions post image

The Role of Representation and Warranty Insurance in M&A Transactions

In today’s mergers and acquisitions market, representation and warranty (R&W) insurance has become a common feature of deal negotiations. Once used primarily in larger transactions, R&W insurance is now frequently incorporated into middle-market deals as buyers and sellers look for efficient ways to allocate risk and close deals. When structured properly, R&W insurance can help […]

Author: George McGowan

Link to post with title - "The Role of Representation and Warranty Insurance in M&A Transactions"
You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What? post image

You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?

Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]

Author: George McGowan

Link to post with title - "You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?"
Why Every Business Should Conduct an Annual Insurance Coverage Review post image

Why Every Business Should Conduct an Annual Insurance Coverage Review

Most New Jersey business owners purchase insurance policies, file them away, and assume they are protected if a claim arises. Without a regular insurance coverage review, many companies discover gaps only after a lawsuit, cyberattack, property loss, or other significant event occurs. An annual insurance coverage review can help businesses identify potential risks, ensure their […]

Author: George McGowan

Link to post with title - "Why Every Business Should Conduct an Annual Insurance Coverage Review"
Demand Letters & Cease and Desist Letters: When to Send One (and When Not To) post image

Demand Letters & Cease and Desist Letters: When to Send One (and When Not To)

Businesses and individuals often encounter situations where another party breaches a contract, fails to pay a debt, or continues harmful conduct. In many such disputes, a precisely drafted demand letter or cease-and-desist letter serves as a powerful legal tool. It can frequently resolve the dispute and avoid litigation. While demand or cease-and-desist letters can resolve […]

Author: George McGowan

Link to post with title - "Demand Letters & Cease and Desist Letters: When to Send One (and When Not To)"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. Message frequency may vary. You can reply STOP to opt-out of further messaging.
“If you would like to submit a file, please email it directly to info@sh-law.com.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!