Can Non-Compete Agreements Be Invalidated?

A non-compete agreement is a contract, and contracts can be invalidated for a specific legal reasons. There are several elements necessary to create a contract in the first place, and most non-compete agreements drafted by lawyers will certainly contain those elements.

If you have signed a non-compete agreement with your current employer or a former employer, you can assume it is a valid contract, unless you were forced to sign it. If you signed it against your will, that may be one of the specific legal reasons needed to cause a court to invalidate a contract, any type of contract, including a non-compete agreement.

Other specific reasons include:

– Failure of one or both parties to actually sign the agreement;
– Failure to amend the non-compete agreement when employment circumstances change;
– Failure in drafting the original non-compete agreement accurately or specifically.

It’s important to understand that a valid contract can become unenforceable. Your non-compete agreement may be valid, but some or all of it may become unenforceable in the opinion of a New Jersey court.

What Makes a Non-Compete Agreement Invalid?

As an example, a national pharmacy benefits company hired an executive and required him to sign an employment contract which including a non-compete clause. He signed it, and five months later he chose to leave that company and go to work for one of its competitors. The executive initiated an action in court against his former employer, asking the court to declare the non-competition provision in his employment agreement invalid.

Among other legal actions, the employer filed an injunction against the executive, in an attempt to block his employment with another pharmacy benefits company. But the court found in favor of the executive and denied the employer’s request for an injunction based on the non-compete clause.

The court’s reason for invalidating the non-compete clause was this – the employee’s duties at his new employer were different than his duties at his former employer seeking to stop his move. The court did not find sufficient evidence that moving to the new employer would harm the legitimate business interests of the former employer.

And the court found the language in the non-compete clause to be, “… unreasonable because of its canyon-like broad coverage.”

This is an example of contract terms that became invalid and unenforceable because they were too broad, for the employee involved and for the larger purpose of facilitating free trade for the good of the public.

Non-compete agreements must be specifically limited in two distinct ways, 1) in time, and 2) in geographic area. If a non-compete clause or agreement fails to limit the scope of the contract to a specific time period and a specific geographic area, it can often be invalidated.

Because legal agreements are usually drafted by lawyers working for the employer, and crafted to protect the interests of the employer, New Jersey courts put the burden of proof on the employer. That means the employer has to prove that you have caused or will cause harm to its legitimate business interests if you accept employment with one of its competitors, or start your own business as a competitor.

John J. Zidziunas & Associates will provide you with expert help in your New Jersey employment law matters, including representing you in non-competition situations. Contact us for a 30 minute consultation at no charge, by email or by calling 973-509-8500.

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