Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Are Certain Non-Compete Agreements on the Way Out in New Jersey?

Author: Scarinci Hollenbeck, LLC

Date: April 30, 2013

Key Contacts

Back

Non-compete agreements, also known as restrictive covenants, are employment contracts designed to limit the ability of an employee to compete with the employer by its stealing customers or trade secrets. Although somewhat controversial and frowned upon as being “restraints on trade,” most states permit such agreements (California is a notable exception).

Under current New Jersey law, enforceable non-compete agreements must strike a balance between protecting the employer’s legitimate business interests with the employee’s right to work in a field for which he or she is trained.  In general, courts balance these considerations by examining the type and size of the business, how long and over what geographic area the restrictions apply and whether adequate consideration or benefit, was given the employee at the time the agreement was signed.

Non-Compete Agreements

Legislation to outlaw certain types of non-compete agreements is currently pending in the New Jersey Assembly. The bill (A-3970), introduced on April 4, 2013, specifically applies to unemployment compensation.

The proposed NJ non-compete legislation would specifically invalidate any covenant, contract, or agreement not to compete, not to disclose, or not to solicit, entered into by an individual with the individual’s most recent employer, if the individual is found to be eligible for unemployment insurance benefits pursuant to New Jersey’s unemployment compensation law (N.J.S.A.43:21-1 et seq.)  What is surprising is that non-solicitation and confidentiality restrictions are universally recognized as protecting the legitimate interests of employers.

Being eligible for unemployment benefits as a qualification is not exactly a “high bar” as New Jersey is considered one of the most liberal, give-away states when it comes to unemployment eligibility determinations.  The bill does stipulate that the provisions of the bill will not apply to any covenant, contract, or agreement in effect on or before the date of the bill’s enactment.  This will have only a limited duration as a qualification, however.

Although it is unclear if this legislation will advance, it appears to have some support in both the Assembly and the Senate. Therefore, New Jersey companies should keep it on their radar. Since the bill would not apply retroactively, it may be necessary to execute agreements in advance of the law’s effective date.  Even better, employers should contact their legislative representatives and let them know that they oppose this change.

If you have any questions about the proposed legislation or how it may impact your operations, please contact me, Gary Young, or the Scarinci Hollenbeck attorney with whom you work. 

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Guardianships in New Jersey: When a Loved One Can No Longer Manage Personal or Financial Affairs post image

Guardianships in New Jersey: When a Loved One Can No Longer Manage Personal or Financial Affairs

When a family member can no longer make important decisions for themself, the question is often not whether the family will step in, but whether they have the legal authority to do so. A spouse may manage household finances, or an adult child may arrange medical care and pay bills. Still, informal assistance does not […]

Author: Marc J. Comer

Link to post with title - "Guardianships in New Jersey: When a Loved One Can No Longer Manage Personal or Financial Affairs"
New Jersey’s Revised UHAC Regulations: What Residential Developers Need to Know About Affordable Housing Commitments post image

New Jersey’s Revised UHAC Regulations: What Residential Developers Need to Know About Affordable Housing Commitments

New Jersey residential developers with affordable housing obligations should carefully review their existing approvals, development agreements, and proposed deed restrictions in light of the State’s revised UHAC regulations (Uniform Housing Affordability Controls). The regulations, which took effect on November 6, 2025, significantly change the administration and physical requirements for affordable housing units. For developers with […]

Author: Wendy Rubinstein Quiroga

Link to post with title - "New Jersey’s Revised UHAC Regulations: What Residential Developers Need to Know About Affordable Housing Commitments"
“No Comment” Culture: Why Silence Is Often the Riskiest Legal Strategy post image

“No Comment” Culture: Why Silence Is Often the Riskiest Legal Strategy

A “no comment” response is sometimes the right call when a legal problem arises. As a blanket policy, however, it lets allegations go unanswered, deadlines pass, evidence disappear, and manageable disputes grow into expensive litigation. The businesses that fare best are usually the ones that say little publicly while acting decisively behind the scenes. When […]

Author: Sean M. Pena

Link to post with title - "“No Comment” Culture: Why Silence Is Often the Riskiest Legal Strategy"
Utility-Scale Battery Storage Projects: A Legal Roadmap for Developers, Property Owners and Other Stakeholders post image

Utility-Scale Battery Storage Projects: A Legal Roadmap for Developers, Property Owners and Other Stakeholders

Utility-scale battery energy storage systems (BESS) are becoming an increasingly important component of the electric grid throughout New Jersey, New York, and Pennsylvania. As renewable generation expands, electricity demand increases and grid operators seek greater flexibility, battery storage can help balance supply and demand while providing additional capacity and reliability. For developers, battery storage presents […]

Author: Nicholas Wall

Link to post with title - "Utility-Scale Battery Storage Projects: A Legal Roadmap for Developers, Property Owners and Other Stakeholders"
Navigating Disputes: Hire a Partnership Dispute Lawyer post image

Navigating Disputes: Hire a Partnership Dispute Lawyer

A falling out between partners can be disastrous for any business. In many cases, the partnership will not survive. If you are in an unworkable situation with your partners, it may be time to consult a partnership dispute lawyer experienced in handling partnership breakups and dissolutions before the situation deteriorates any further. It is easy […]

Author: Jay McDaniel

Link to post with title - "Navigating Disputes: Hire a Partnership Dispute Lawyer"
Section 363 Sales in Bankruptcy: What Businesses, Lenders, and Buyers Need to Know post image

Section 363 Sales in Bankruptcy: What Businesses, Lenders, and Buyers Need to Know

When a company enters Chapter 11 bankruptcy, many assume the process will culminate in a lengthy reorganization plan. However, distressed businesses are increasingly being sold through a different mechanism — a sale under Section 363 of the United States Bankruptcy Code. A Section 363 sale allows a company, as a debtor-in-possession in bankruptcy, to sell […]

Author: John D. Giampolo

Link to post with title - "Section 363 Sales in Bankruptcy: What Businesses, Lenders, and Buyers Need to Know"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. Message frequency may vary. You can reply STOP to opt-out of further messaging.
“If you would like to submit a file, please email it directly to info@sh-law.com.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!