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Pending New Jersey Bill Would Limit Non-Compete Agreements in Employment

Employment agreements often contain clauses and terms intended to protect an employer’s business interests. When a contractual provision limits an employee’s actions, it is known as a restrictive covenant (RC). Sometimes, RCs create difficulties for employees. A common type of RC is the non-compete agreement, which bars an employee from accepting work with the employer’s competitors under various circumstances. Many workers may feel like they are not in a position to try to negotiate different terms with a current or prospective employer. New Jersey employment law sets limits on the extent of RCs in employment or severance agreements. A bill pending before the New Jersey Legislature would expand the limits on some RCs, including non-compete agreements, and provide employees with additional rights.

A non-compete agreement may prohibit an employee from working for a competitor while employed by the employer. It may also prohibit employment with a competitor after the employee no longer works for the employer. In order to be enforceable, a non-compete agreement must be very clear about its terms, such as who counts as a competitor and how long the agreement remains in force for the employee. A 1970 decision by the New Jersey Supreme Court identified three elements that a non-compete agreement must satisfy:
1. The scope of the agreement is limited to the employer’s “legitimate interests.”
2. The agreement does not place an “undue hardship” on the employee.
3. The agreement is not “injurious to the public.”

The bill in the New Jersey Legislature, A3715, is currently pending before the Assembly Oversight, Reform and Federal Relations Committee. It identifies multiple groups of people who may not be subject to non-compete agreements at all, including anyone who is considered exempt under the Fair Labor Standards Act, undergraduate or graduate interns, temporary or seasonal workers, independent contractors, employees who are less than 18 years old, and employees who were employed for less than one year. For anyone who could be subject to a non-compete agreement, the bill sets numerous limitations on the agreement’s terms.

First, the bill would codify the elements described in the New Jersey Supreme Court decision and adds further details. A non-compete agreement could not remain in force for longer than twelve months after the end of the employment relationship, and it would have to have a reasonable geographic limitation. The bill also adds notice requirements for employers:
– If a non-compete agreement is part of the initial employment contract, the employer must notify the employee by the earlier of the date of the official job offer or thirty days before the employee’s start date.
– If the employer presents a non-compete agreement after the employee has started working for it, it must give notice thirty days before it may begin enforcing the agreement.
– At the end of the employee’s employment, the employer has ten days to give notice of its intent to enforce a non-compete agreement.

Perhaps the most notable protection that the bill offers for employees involves pay and fringe benefits. An employer that wants to enforce a non-compete agreement after the end of the employment relationship would have to continue paying the employee at the same rate and provide the same fringe benefits they would receive if they were still employed.

If you have experienced unlawful workplace practices in New Jersey or New York, you need a skilled and knowledgeable advocate who can help you fight for your rights. The employment lawyers at the Resnick Law Group can answer your questions and discuss your options. Please contact us today online, at 973-781-1204, or at 646-867-7997 to schedule a confidential consultation.

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