There are many bills proposed in the New Jersey legislature every year. Very few become law, but if Assembly Bill No. 1650 makes that journey, non-compete agreements between employers and employees would be more employee-friendly.It would strongly limit New Jersey employers’ ability to stop you from working for a competing business or starting your own. Supporters claim it will encourage innovation by helping competition and eliminating hardships these agreements can impose on employees. The bill is under review by the Senate Labor Committee.State law, depending on the facts, generally discourages non-compete agreements. They may state that in exchange for employment or a benefit part of a severance package if the employee leaves, the employee agrees not to join a competitor in a geographic area for a specified period. Signing such an agreement may be required before you start work. If presented with one while on the job, if you refuse to sign you could lose your job.

Whether a Non-Compete Agreement is Enforceable is Often a Guessing Game

If an ex-employee works elsewhere and an unhappy ex-employer tries to stop his or her employment, claiming the agreement was breached, it’s a very fact-specific issue. These cases often boil down to what a judge or jury decides is “reasonable,” such as the geographic area covered or the time frame involved. Whether or not the new employer competes with the old one can also be disputed.Given all these variables, an attorney reviewing such an agreement has a hard time clearly stating whether or not the limitations are legally enforceable (unless the language is extreme). Another problem for employees sued by ex-employers is few can afford to defend themselves in the legal system.

Fewer Employees Can Be Covered, Those Who are Have More Protections in the New Bill

Assembly Bill No. 1650 could significantly change what’s happening now by greatly limiting employers’ use of non-compete agreements. If the bill becomes law, for a non-compete agreement to be enforceable:

• Its terms would need to be given to a prospective employee in writing with a formal job offer or 30 business days before the job starts, whichever is earlier. If the person is already working, he or she must get it at least 30 business days before it becomes effective
• It must be executed by the employer and the employee
• It must expressly state the employee has a right to consult with an attorney before signing it
• It can’t restrict the employee’s post-job activities any more than necessary to protect the employer’s legitimate business interests
• It can’t cover more than twelve months after the employee’s departure
• It must be reasonable in geographic scope and limited to areas where the employee provided services, or had a material presence or influence, two years before the date of employment termination• It can’t prevent an employee from seeking a job in another state
• The limits on restricted activities must be reasonable given the employer’s interests and only include the services the person provided in the last two years of employment
• It can’t retaliate against an employee who defends against or challenges the validity or enforceability of the non-compete agreement
• It can’t have a choice of law provision (language stating the contract would be enforced under the laws of a particular state) that would result in avoiding this new law if the person lives and works in New Jersey when the job ended and has been for at least 30 days before the employment termination
• It can’t force employees to waive any substantive, procedural, or remedial rights under the law
• It can’t stop an employee from providing a service to the employer’s client if the employee didn’t initiate or solicit the client
• It can’t put an undue burden on the employee, be harmful to the public, or inconsistent with public policy

The bill would also limit who would be subject to a non-compete agreement. It couldn’t apply to:

• Hourly workers under federal law
• Students in an internship or short-term employment
• Apprentices in apprenticeship programs
• Seasonal or temporary workers
• Employees fired for some reason other than misconduct
• Employees laid off by the employer
• Employees younger than 18
• Low wage employees
• Employees on the job less than a year
• Independent contractors

Notice Requirements, Pay for Finding a Job, and a New Cause of Action

An employer would have to notify an employee no later than ten days after they left if it plans to enforce the agreement. This won’t apply if the worker is fired for misconduct. An employee subject to a non-compete would be fully paid and get full benefits until he or she can look for another job, unless the employee was fired for misconduct.Employees would have a right to file a civil lawsuit against any employer or person who violates this new law. A judge may decide the agreement is unenforceable, stop the employer from enforcing it, and or award money damages, including lost compensation, reasonable attorneys’ fees, costs, and damages up to $10,000.This is just a proposal. Past bills addressing non-compete agreements have failed, but it’s possible New Jersey workers will have better legal rights if the bill is signed into law.

Take the Next Steps

If you have questions about non-compete agreements or your employer has given you one to sign, contact our Kingston law offices. You can contact us by phone (609-683-7400), online, via email (hisaacs@kingstonlawgroup.com).We can schedule a reduced fee consultation. It will be conducted on the phone, on Zoom, or in-person with social distancing and masks. You can pay with a credit card and we schedule appointments from 9 a.m. to 5:30 p.m., Monday through Friday. You can have a weekday, evening appointment by pre-arrangement only. Contact us today. You’ll be glad you did.