New Jersey Judge Rules for Former Employee in Dispute Over Noncompete Clause

arm-wrestlingWhen an employee ceases to work for an employer, many employers will want to protect their investment in that employee in any way they can. Nondisclosure agreements and trade secret laws cover confidential and proprietary information that employees might obtain during their employment. Employees who bring a particular set of skills or knowledge, and who might obtain additional valuable skills through their work for the employer, could potentially have a negative impact on the employer’s business if they took that knowledge to a competitor. Some employers therefore try to protect themselves with noncompete agreements, which state that the employee may not accept employment with a competitor after they leave the employer. New Jersey employment laws only allow enforcement of noncompete agreements when they have strict limitations, such as a limited geographic area and a limited duration. A New Jersey Superior Court judge in Bergen County recently ruled in favor of a former employee who was seeking to invalidate a noncompete clause. Abuaysha v. Shapiro Spa, No. L-000988-18, complaint (N.J. Super. Ct., Bergen Cty., Feb. 1, 2018)

Injunctive relief is one of the main methods of enforcing a noncompete agreement. Employers often file suit against a former employee and seek a preliminary injunction, but it is also possible for a former employee to file suit first. In order to obtain a temporary injunction in New Jersey, a movant must establish four elements:  (1) “irreparable harm” without the injunction, (2) a settled legal right underlying the movant’s claim, (3), “a reasonable probability of ultimate success on the merits,” and (4) a balance of hardships faced by the parties that favors granting the injunction. Crowe v. De Gioia, 90 N.J. 126, 132-34 (1982). In the case of noncompete agreements, courts must look closely at the second and third parts of this test.

New Jersey courts use the “Solari/Whitmyer test,” named for two New Jersey Supreme Court decisions, to determine whether a noncompete agreement is enforceable. Solari Industries, Inc. v. Malady, 55 N.J. 571 (1970); Whitmyer Bros., Inc. v. Doyle, 58 N.J. 25 (1971). This test has three parts:  (1) protection of legitimate employer interests, (2) no undue hardship on the employee, and (3) no injury to the public. When determining whether a noncompete agreement protects the employer’s interests, the court has noted that an “employer has no legitimate interest in preventing competition as such.” Whitmyer, 58 N.J. at 33. Examples of legitimate interests include protection of confidential information, trade secrets, and customer relationships. Id. The geographic limits, duration, and other restrictions in a noncompete agreement must be “no broader than necessary to protect the employer’s interests.” Cmty. Hosp. Grp., Inc. v. More, 183 N.J. 36, 58-59 (2005).

The Abuaysha case involved a total restriction on competing employment for two years within five miles of the employer’s location. The former employee filed suit and obtained an order for temporary restraints. The judge denied the employer’s motion to vacate the temporary restraints, ruling that the noncompete agreement imposed an undue hardship on the employee by imposing “a complete bar on competition.”

If you and an employer are involved in a dispute over a noncompete agreement in New Jersey or New York, the Resnick Law Group’s employment attorneys are available to help you. You can contact us online, at 973-781-1204, or at 1.888.863.3423 today to schedule a confidential consultation to see how we can help you.

More Blog Posts:

White House Calls on States to Limit the Scope of Non-Compete Agreements, The New Jersey Employment Law Firm Blog, December 23, 2016

Non-Competition Agreements Under New Jersey Law, The New Jersey Employment Law Firm Blog, November 20, 2015

Sandwich Chain Reportedly Requiring Employees to Sign Non-Competition Agreements, The New Jersey Employment Law Firm Blog, November 12, 2014

Photo credit: 3dman_eu [CC0 1.0], via Pixabay.

Contact Information