08/17/2018 3:06 pmIn New Jersey, as in many other states, non-compete agreements that prohibit an employee from taking advantage of future employment opportunities with certain competitors are generally enforceable, though there are a number of limitations that are worth pointing out. As a rule, employers cannot impose unlimited restrictions on their employees pursuant to a non-compete agreement, as it would unreasonably restrict their right to work.
Employers interested in learning more about their non-compete agreements (and how best to proceed with the enforcement process) should get in touch with qualified New Jersey employment attorneys who have experience handling such disputes.
Non-compete agreements involve complex, conflicting interests between the employer (legitimate business interests) and employee (right to work), and as such, they demand a proper balancing of circumstantial factors. Courts tend to scrutinize non-compete agreements to ensure that the employee is not being needlessly oppressed by their employer.
Enforceable non-compete agreements:
1. Protect the employer’s legitimate business interests;
2. Avoid the imposition of an undue hardship on the employee; and
3. Do not cause harm to the general public.
Let’s examine each, in turn.
Legitimate Business Interest
Legitimate business interests do not include the interest in minimizing the competition. Instead, a legitimate interest may include confidentiality issues relating to intellectual property (and internal data), securing existing customers, and more. If you simply do not want your employee to work for a competitor because you believe that they are a great worker and will benefit the competitor’s business, that is not a legitimate interest.
Undue Hardship
Employers cannot impose undue hardship on their employee by virtue of the restrictive covenant. Undue hardship involves a number of different factors, such as duration, geographical extent, and industry restriction. For example, the court may find that a multi-year restriction is an undue hardship, but a single year restriction is reasonable. Similarly, the court may find that a restriction that applies nationally imposes undue hardship, whereas a regional restriction is reasonable.
Harm to the General Public
Whether the non-compete agreement will cause harm to the general public depends on the circumstances. The court will evaluate the facts to determine if the enforcement of the agreement will interfere with activities (i.e., research and development) that could be beneficial to the public.
For example, if you attempt to enforce a non-compete agreement against an employee-researcher who has the expertise to develop a cancer vaccine, then the courts are much less likely to allow for such a restriction (if it prevents them from obtaining the employment necessary to continue with their research).
In the event that the court finds your non-compete agreement overly oppressive or restrictive, all is not necessarily lost — the court may choose to circumscribe the terms of the agreement and limit the restriction in some way, thus allowing for partial enforcement of its terms.
Suppose, for example, that you have entered into a non-compete agreement with your employee. The agreement disallows working with certain competitors for four years after the end of their employment with you. The court decides that the duration is too long, and thus overly restrictive. They decide to partially enforce the restriction by reducing the duration to just two years.
If you are a New Jersey employer and are interested in enforcing a non-compete agreement against a former employee (who appears to be violating the terms of your existing non-compete agreement), then it’s important that you contact a qualified employment attorney for further assistance. Your attorney will assess the terms of the non-compete agreement at issue and will work with you to develop a strategic plan for preventing the employee from damaging your business interests.
