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Noncompete Agreements in New Jersey: Legal Landscape and Recent Developments

Understanding Noncompete Agreements in New Jersey

Legal Framework and Precedents

Under New Jersey Law, noncompete agreements precluding employees from competing with their former employer are enforceable where the agreement is reasonable under the circumstances, which requires a fact-sensitive analysis. Under Solari Indus, Inc. v, Malady, 55 N.J. 571, 583 (1970), a noncompete agreement will be struck down if it is overbroad. Under Solari, there are restrictions on noncompete agreements such as reasonable areas, durations and scope of activity. An agreement is deemed reasonable under that test if it (1) protects legitimate interests of the party seeking to enforce the covenant; (2) does not impose an undue hardship on the party to be restricted; and (3) is not injurious to the public. Maw v. Advanced Clinical Commc'ns, Inc., 179 N.J. 439, 447 (2004). Further, courts "will not enforce a restrictive agreement merely to" prevent competition. Ingersoll-Rand Co. v. Ciavatta, 110 N.J. 609, 635 (1988).

Geographic Restrictions and Enforceability

Under ADP, LLC v. Kusins, 460 N.J. Super. 368 (App. Div. 2019), the Court like many others found that a reasonable geographic restriction is not in violation of a non-compete clause. However, to restrict the geographic area to the entirety of North America, a multitude of countries, states and time zones, is overbroad and unenforceable.

Proposed Legislation and Changing Landscape

As an indication of how unfavorable noncompete agreements are, a bill is currently before the New Jersey Legislature limiting the scope of a noncompete agreement. One of the key points in the bill are that the agreement shall not be broader than necessary to protect legitimate business interests. Another key point is that the agreement shall be reasonable in geographical reach and be limited to the areas where the employee provided services or had a material presence. Also, in consideration of requesting that an employee not work for a competitor for a period of a year, the bill proposes an employer paying an employee 100% of salary and benefits for the requested time period.

Nationwide Developments

While not binding, New Jersey’s sister state, New York, has passed a bill banning noncompete agreements altogether. Similarly, the Federal Trade Commission proposed a rule condemning noncompete agreements and seeking to prohibit them nationwide with very limited exceptions, including current agreements. Another indication that noncompete agreements are unfavorable is a memorandum authored by the National Labor Relations Board stating that the agreements violate the National Labor Relations Act.

Pending Legislation

To show how the legal landscape is changing in terms of noncompete agreements, the Workforce Mobility Act is currently pending in Congress prohibiting noncompete agreements across the country.

Legal Representation

At John J. Zidziunas & Associates, LLC our employment discrimination lawyers represent employees that have been harmed in New Jersey and Manhattan, Brooklyn, Queens, the Bronx, Staten Island, Nassau County, or Suffolk County workplaces. If you are an employee or employer who is unsure of legal policies, call us at (973) 509-8500 or Contact us Here. We represent workers on a contingency fee (winning the case) basis with free consultations. We also defend employers being sued for frivolous and non-legitimate claims.

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