A non-compete agreement or clause restricts what you can do after you leave your employer. Its enforceability is independent of whether you quit or get fired. Whether it’s enforceable depends on the specific language and terms of the non-compete. The language under one set of facts may be legally binding while in a different scenario perhaps not. The best time to understand your rights is before you sign, not after you’ve quit or been fired.
California does not enforce anti-competitive employment agreements or clauses as a matter of their stated public policy. New Jersey will enforce such provisions, even though disapproving of their anti-competitive nature. The burden rests on the employer and the test is one of reasonableness. Enforcement depends on a balancing of the employer’s legitimate need for protection against the former employee’s resulting hardship and unfairness.
Non-competes have been considered by New Jersey courts for over 130 years. For a time, the courts ruled that an overly broad non-compete was entirely unenforceable. That changed in a 1970 decision by our State Supreme Court, in which the Court permitted trial courts to use their discretion as to enforcement, based on all known facts and circumstances. Reasonableness is the touchstone.
For example, noncompetes are enforceable if they protect the employer’s legitimate interests; there’s no undue hardship on the employee; and the public interest is not harmed. The employer has the burden of showing the agreement is legally enforceable. The trial court, when deciding the case, needs to balance protecting the employer’s legitimately protectible interests against the employees’ predictably resulting hardship.
Protectible interests include trade secrets, proprietary information, and customer relationships. Information that is current, highly specialized, not generally known in the industry, created by the employer, are all protection-worthy when the employee, due to his or her employment, has been exposed to and enriched by the target information solely because of the job.
In New Jersey, merely preventing competition is not a legitimate business interest. The knowledge, skill, expertise, and information obtained by the employee during his or her employment becomes part of the employee’s personhood. The employee can take away and use that knowledge and skills in any business or profession, including when s/he competes against the former employer.
A state appellate court decision from 2019 in the case of ADP, LLC v. Hopper spells out how a trial court should look at the enforceability of a non-compete.
When considering the hardship an employee may face, trial courts need to decide the chances the employee will find work in his or her chosen field despite the restrictions and the burden the restrictions put on the employee in the meantime. Restrictions on geographical stretch, length of sidelining, and the subject matter of the new job will be enforced if they’re reasonably necessary to protect the employer’s legitimate business interests.
After the trial court considers these issues, the non-compete could be enforceable as a whole or just partially enforceable to the extent reasonable under the circumstances. A court could pick and choose which parts are unreasonable and unenforceable (called “blue-penciling” the agreement) and enforce the rest in terms of the geographic limit, time, and the scope of prohibited activity.
Some areas of the law are straightforward, and there are “red lines” that can’t be crossed. In employment law, including the law of non-compete agreements, that’s not the case. There are few clear lines, just grey areas you have to navigate unless the agreement is clearly out of bounds (as to which your employment lawyer will advise you).
If you have been asked to sign a non-compete agreement and you want to understand how it applies to you, we can help. If you’re considering a new job or have already accepted one after signing such an agreement with your last employer, we can advise as to how it may impact your next job, your recruiter, and/or your next employer.
Contact the Kingston Law Group’s employment law attorneys by calling us at 609-683-7400, or contact us online. Contact us today. We will schedule you for a near-term and reduced fee initial consultation at our Central Jersey law offices in Kingston. We are compassionate counsel and tough advocates. We will listen to your facts, explain the law, and help you find a pathway to economic and social justice. We will vindicate your rights if they have been violated. Call today. You will be glad you did.
