A non-compete agreement is typically a clause within an employment agreement between an employee and employer, but can also be present in partnership agreements and other types of contracts. Employers in New Jersey may have mandatory non-competes for their employees to sign as a condition of employment with their company. A non-compete agreement can contain a variety of provisions involving solicitation of customers, becoming a competitor, disclosing trade secrets, or using intellectual property elsewhere. As an employee, it is important to carefully review the scope of a non-compete agreement and consider its potential impact on your future business and employment options before choosing to sign. If you are concerned about the potential legal ramifications of a proposed non-compete agreement in New Jersey, you should seek counsel from a knowledgeable employment lawyer who can advise you of your rights, obligations, and limitations under the agreement.
Under New Jersey law, a non-compete agreement must protect the legitimate interests of the employer, not cause undue hardship to an employee, and not cause injury to the public to be enforceable in court. In the landmark New Jersey Supreme Court decision in the case of Solari v. Malady, the court unanimously ruled that a non-compete agreement will be legally enforceable if it is deemed reasonable under the circumstances of the specific case. This provides for a significant amount of interpretation when evaluating a non-compete clause for its validity under NJ law.
The general requirements for a valid non-compete in New jersey are that it “protects the legitimate interests of the employer, imposes no undue hardship on the employee and is not injurious to the public.” Non-compete agreements that meet these requirements are generally enforceable, with some significant limitations. Since a non-compete agreement is distinct among employment contracts, inasmuch as it limits free market competition, New Jersey often prioritizes the ability of the individual to earn income.
A non-compete clause that prohibits an employee from taking a client list and soliciting a business relationship with their former company’s clients will usually be enforced by a court. Sometimes a non-compete agreement may prohibit a former employee from soliciting clients within a particular region for a period of time following the end of their employment. This type of provision is generally enforceable, provided it does not interfere with the individual’s ability to earn a livelihood.
If a court finds that a non-compete agreement is unreasonable in time or geographical scope, it will not enforce the provision. The provision will also not be enforced if its duration exceeds 12 months, applies outside the state, or covers areas where the employee did not actually work or have a “material presence or influence” during the last two years of their employment.
Also, terms that prohibit an employee from working for a competitor are generally unenforceable in New Jersey. However, a valid employment agreement may prohibit the former employee from sharing client lists or any proprietary information, like trade secrets, of the former employer with the new company.
The choice to sign a non-compete agreement is a personal decision, as well as a business decision. Non-compete clauses come in many forms—some provide few restrictions and others can severely limit your future options in your professional field for a period of time, which can have significant consequences to your career or business.
You also need to consider your career aspirations and the potential that those aspirations could shift in the future before accepting a non-competition contract. Assuming the agreement is legally enforceable, you will not be able to change your mind after agreeing to a non-compete clause. Carefully considering your professional goals and potential opportunities in the short and long-term is essential before moving forward with a non-compete agreement in New Jersey.