Insight

Non-Compete News: The End Of New Jersey Non-Competes as We Know Them?

Non-Compete News: The End Of New Jersey Non-Competes as We Know Them?

Mark A. Saloman

Mark A. Saloman

December 15, 2022 05:05 PM

Non-Compete News: The End Of New Jersey Non-Competes as We Know Them?

Last week, the New Jersey Assembly’s Labor Committee passed bill A3715, designed to sharply limit the available provisions, use, and enforceability of restrictive covenants in employment contracts by New Jersey employers. A3715 purports to address the laudable goal of exempting low-wage workers, students, and seasonal and temp workers from post-employment restraints or covenants. But the bill goes much further and, if passed, the new law will effectively end more than 100 years of non-compete use by New Jersey employers.

  • Mandatory Garden Leave?

The first notable pain point for employers is mandatory “garden leave”––an arrangement by which an employer has the option to enhance the enforceability of its restrictive covenants by paying the former employee for the duration of the restraints. A3715 requires garden leave for every employee subject to a non-compete restriction, regardless of level. The bill requires paid garden leave even if the employee resigns and/or obtains new employment.

  • Independent Contractors Exempt?

Though restrictive covenants are common in contracts between employers and their independent contractors, A3715 bans enforcement of restrictive covenants against independent contractors.

  • Duration Limited?

Though New Jersey courts enforce non-compete agreements longer than one year, A3715 limits the duration of restrictive covenants to 12 months following the date of termination of employment––regardless of any case-specific facts which may warrant a longer period of enforcement.

  • “Short-term” Employees Exempt?

The bill bars enforcement of a non-compete agreement against an employee––regardless of level––who leaves an employer within one year. This creates the probability of high-level employees with access to a wide range of future-looking confidential information who depart for a competitor on their 364th day on the job, leaving the former employer with no recourse.

  • Geographic Scope Limited?

The bill appears to prevent enforcement of a non-compete if the former employee simply leaves New Jersey. New Jersey’s small size and easy proximity to so many neighboring states make this provision especially problematic.

  • Waiver of Enforcement Rights?

Though employers routinely file enforcement litigation in the non-compete space shortly after the former employee leaves, A3715 forces employers to sue within 10 days or forever lose that right. That surely will create the unintended consequence of discouraging employers from taking a thoughtful and measured approach to enforcement actions. Instead, employers must (and will) file more lawsuits for no reason other than to preserve their rights, even if litigation is not the preferred course of action.

  • Elimination of the “Blue Pencil”?

New Jersey has long recognized the “blue pencil” doctrine, by which a reviewing court can judicially modify or revise an overbroad or impractical restrictive covenant. A3715 eliminates a court’s ability to judicially modify an agreement to fairly effectuate the parties’ intent.

  • Non-Solicitation Limited?

A3715 goes beyond limiting non-compete agreements and also shrinks employers’ protection from former employees who perform services for customers of their former employer. Specifically, the bill allows a former employee to work with and service customers of their former employer so long as the customer reaches out to the employee first.

  • A New Cause of Action against Employers?

Besides limiting the utility and enforceability of restrictive covenants, the bill takes the extraordinary step of creating a brand new cause of action against an employer that violates A3715. This includes a liquidated damages provision and entitlement to reasonable attorneys’ fees and costs for even a technical violation of the myriad restrictions to the language and scope of any restrictive covenant––and even absent actual damages to a former employee.

Employers’ Bottom Line: If passed in its current form, A3715 essentially guts the use of non-compete and customer non-solicitation agreements in New Jersey. The bill goes far beyond the prophylactic measures of our neighboring states, creates significant economic uncertainty, and will surely affect New Jersey’s ability to compete. We will be watching this bill closely as it progresses through the Legislature.

If you have any questions regarding this Alert, please contact the author, Mark A. Saloman, partner in our Berkeley Heights office and Co-Chair of FordHarrison's Non-Compete, Trade Secrets and Business Litigation practice group at msaloman@fordharrison.com.

Related Articles

Noncompete Extinct


by Mark W. Bakker

The Federal Trade Commission has proposed a blanket ban on noncompete agreements that could radicalize post-termination protections afforded to employers.

Dark figure walking up red staircase to open door

IN PARTNERSHIP

Federal Trade Commission’s Proposal Sets Noncompete World on Fire: Justified Fears?


by David J. Carr

A recent FTC proposed rule that would bar noncompete agreements could have major impacts against the working class.

Blue maze walls and bright circles with small outline of person walking through

Legal Trends in the Modern Workplace


by Emma R. Schuering and Meghan H. Hanson

Employees are reevaluating their jobs and the workforce, including issues like pay equity, forced arbitration, paid time off, discrimination and other such policies as they continue to navigate a post-pandemic work life.

Legal Trends In the Workplace Post-Pandemic

Compelled to Compete


by Ashish Mahendru

Courts and legislatures—and now the White House—are taking an increasingly dim view of noncompete employment agreements, a development the pandemic has quickened. What can employers do to protect their confidential information?

Protection for Employers Beyond Noncompetes

Trending Articles

Discover The Best Lawyers in Spain 2025 Edition


by Jennifer Verta

Highlighting Spain’s leading legal professionals and rising talents.

Flags of Spain, representing Best Lawyers country

Unveiling the 2025 Best Lawyers Editions in Brazil, Mexico, Portugal and South Africa


by Jennifer Verta

Best Lawyers celebrates the finest in law, reaffirming its commitment to the global legal community.

Flags of Brazil, Mexico, Portugal and South Africa, representing Best Lawyers countries

Presenting the 2025 Best Lawyers Editions in Chile, Colombia, Peru and Puerto Rico


by Jennifer Verta

Celebrating top legal professionals in South America and the Caribbean.

Flags of Puerto Rico, Chile, Colombia, and Peru, representing countries featured in the Best Lawyers

How to Increase Your Online Visibility With a Legal Directory Profile


by Jennifer Verta

Maximize your firm’s reach with a legal directory profile.

Image of a legal directory profile

Paramount Hit With NY Class Action Lawsuit Over Mass Layoffs


by Gregory Sirico

Paramount Global faces a class action lawsuit for allegedly violating New York's WARN Act after laying off 300+ employees without proper notice in September.

Animated man in suit being erased with Paramount logo in background

Tampa Appeals Court ‘Sends Clear Message,” Ensuring School Tax Referendum Stays on Ballot


by Gregory Sirico

Hillsborough County's tax referendum is back on the 2024 ballot, promising $177 million for schools and empowering residents to decide the future of education.

Graduation cap in air surrounded by pencils and money

The Future of Family Law: 3 Top Trends Driving the Field


by Gregory Sirico

How technology, mental health awareness and alternative dispute resolution are transforming family law to better support evolving family dynamics.

Animated child looking at staircase to beach scene

The Human Cost


by Justin Smulison

2 new EU laws aim to reshape global business by enforcing ethical supply chains, focusing on human rights and sustainability

Worker wearing hat stands in field carrying equipment

The 2025 Legal Outlook Survey Results Are In


by Jennifer Verta

Discover what Best Lawyers honorees see ahead for the legal industry.

Person standing at a crossroads with multiple intersecting paths and a signpost.

Safe Drinking Water Is the Law, First Nations Tell Canada in $1.1B Class Action


by Gregory Sirico

Canada's argument that it has "no legal obligation" to provide First Nations with clean drinking water has sparked a major human rights debate.

Individual drinking water in front of window

Effective Communication: A Conversation with Jefferson Fisher


by Jamilla Tabbara

The power of effective communication beyond the law.

 Image of Jefferson Fisher and Phillip Greer engaged in a conversation about effective communication

New Mass. Child Custody Bills Could Transform US Family Law


by Gregory Sirico

How new shared-parenting child custody bills may reshape family law in the state and set a national precedent.

Two children in a field holding hands with parents

Best Lawyers Expands With New Artificial Intelligence Practice Area


by Best Lawyers

Best Lawyers introduces Artificial Intelligence Law to recognize attorneys leading the way in AI-related legal issues and innovation.

AI network expanding in front of bookshelf

Finding the Right Divorce Attorney


by Best Lawyers

Divorce proceedings are inherently a complex legal undertaking. Hiring the right divorce attorney can make all the difference in the outcome of any case.

Person at a computer holding a phone and pen

Jefferson Fisher: The Secrets to Influential Legal Marketing


by Jennifer Verta

How lawyers can apply Jefferson Fisher’s communication and marketing strategies to build trust, attract clients and grow their practice.

Portrait of Jefferson Fisher a legal marketing expert

New Texas Law Opens Door for Non-Lawyers to Practice


by Gregory Sirico

Texas is at a critical turning point in addressing longstanding legal challenges. Could licensing paralegals to provide legal services to low-income and rural communities close the justice gap?

Animated figures walk up a steep hill with hand