New Jersey Non-Compete Law: Have You Violated it?

In the state of New Jersey there is no state or federal law governing non-compete agreements in general. Some professions, such as law and psychology, have rules of professional conduct addressing non-compete agreements, but they are not based on federal or state laws.

Conceptually, courts in New Jersey tend to enforce restrictive covenants in non-compete agreements only if they are limited in scope and duration. This is a reflection of the state’s distaste for any form of restraint on trade.

How Do NJ Courts See Non-Compete Agreements?

Usually it is the employer taking the former employee to court, so it makes sense that judges put the burden of proof on the employer to prove an agreement is fair and necessary, and it should be enforced by the courts.

Judges are always looking for the specific covenants in non-compete agreements to reflect common sense. They want covenants to be “reasonable.” So, in order for an employer to prove the reasonableness of a non-compete agreement, it must 1) be necessary to protect the parties’ legitimate interests, 2) not cause undue hardship on the former employee, and 3) not thwart the interest of the general public.

Employers place value on their customer relationships, their confidential information and their trade secrets. If they can show legitimate reasons the former employee might harm them by jeopardizing the value of these intangibles, they may have a case in court.

Basically, a judge is weighing the protection of an employer’s valuable business assets against the possible harm to the former employee who may be constrained from seeking another job in the same line of work. It’s a trade-off and the facts of each particular case are different.

What Happens If You Are Accused of Violating A Non-Compete Agreement?

Your circumstances at the time you are sued or notified of a potential lawsuit will partially determine what happens next. If you have already secured another job, that’s one situation a judge will take into consideration. If you are still looking for work, that’s a different situation entirely.

A NJ judge will also look carefully at who terminated the employer-employee relationship. If the employer terminated the relationship it may enforce the non-compete agreement, as long as there is no conflict in the contract terms. An agreement may not hold up in court, or part of it may hold up and part may be discarded, based on the facts and the circumstances presented to the court.

There is usually a period of time specified in non-compete agreements, and sometimes there are geographic restrictions, too. These restrictive features will be considered separately in considering how they affect both the employer and the former employee.

Instead of geographic limits, a non-compete may limit a former employee’s activities with customers of the employer. New Jersey courts have upheld an employer’s right to protect its customer lists, but also a former employee’s right to do business with customers he worked with prior to his recent former employment, and with customers not appearing on the employer’s customer list.

Your best decision is to retain an employment lawyer to help you respond if you receive a letter or a summons based on your non-compete agreement with a former employer.

John J. Zidziunas & Associates will provide you with expert help in your NJ non-compete matters, offering advice and representation. Contact us for a 30 minute consultation at no charge, by email or by calling 973-509-8500.

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