Employers often require employees to sign a non-compete agreement in order to protect information that is confidential and proprietary, and would competitively harm the company if disclosed to competitors. As you might expect, these agreements are generally loaded in favor of the employer. The claimed confidential information is usually some combination of customer lists, unspecified trade secrets, and intellectual property. The non-compete agreement attempts to prevent an employee from using or disclosing this kind of information or becoming a competitor of her employer.
You will easily see that non-compete agreements are a different species of contract. Unlike employment contracts, a non-compete agreement is inherently anti-competitive and restricts freedom of contract. This contradicts basic precepts of American and New Jersey public policy. For this reason some states outlaw the use of non-compete agreements altogether. Most states allow them, however, within limits, and New Jersey is among these. Principally this means that non-compete agreements be limited and reasonable as to duration and geographic scope, and must also go no farther than necessary to protect the employer's legitimate business interests. Two years is usually the maximum duration that courts will allow. The geographic scope that will be considered reasonable depends upon the job. It might be unreasonable to bar the employee of a bagel shop from working more than two miles from the employer's establishment. On the other hand, it might reasonable to ban a highly specialized consultant from working anywhere in the United States. This issue has become increasingly complex with the proliferation of businesses that work across state and national borders, primarily through electronic media. In addition, the non-compete agreement must fairly balance the needs of the employer against those of the affected employee.
Non-compete agreements can be imposed by employment contract, a separate non-compete contract, at the beginning of the employment relationship, during it, or as a condition of receiving a severance package.
From the perspective of an employee who wants to protect her right to the employment of her choosing in the face of a non-compete, there are various options. Among others they include negotiating out of it, negotiating in advance to limit its scope, and challenging it in court. In court the agreement could be invalidated, or the court might decide to "blue pencil" it. Blue penciling means that the court can modify the terms of the agreement to make it fair for both employer and employee.
Non-compete matters can be critically important to employees. They can spell the difference between pursuing the career you want and having to sit on the sidelines for years in order to favor the interests of a company that you no longer work for. The law here is complex, and you will not want to make a mistake. If you have questions, feel free to contact Steinberg Law by phone or using the contact form above.
In the meantime you can find more information by going to our blog and searching for "non-compete." You'll find lots of interesting information there.