Morris County, New Jersey Noncompete Lawyers | Morristown Employment Law Attorneys
Noncompete agreements and other post-employment restrictive covenants
Many employers ask their employees to sign noncompete agreements which prevent employees from a) working for competitors (“noncompete agreement”) or b) disclosing confidential business information (“confidentiality agreement”). In New Jersey, these agreements, collectively called “restrictive covenants,” are valid and enforceable to the extent they are reasonable. A restrictive covenant is considered reasonable if it protects the employer’s legitimate interests but does not impose an unreasonable burden on the employee or the public interest. If the courts find the restrictive covenants are unreasonable, the court can revise the clause to make it reasonable.
A noncompete agreement is a contract that bars former employees from working for competitors. Usually, they last for one or two years and prevent the employee from working within a defined geographic area.
When evaluating the reasonableness of a noncompete agreement, courts have to answer three basic questions:
1) Does the noncompete agreement last too long?
2) Is the geographic scope of the noncompete agreement too broad?
3) Does the noncompete agreement put too many restrictions on the employee’s future employment opportunities?
The answers to these questions depend upon many different factors including the employee’s duties and the nature of the employer’s business. For example, a court might allow an employer to prevent a national sales manager from working for a competitor located anywhere in the United States. On the other hand, a court would probably find such a restriction unreasonable if applied to an employee whose territory was limited to a single city.
There are additional factors that must be considered when analyzing the enforceability of noncompete agreements. For example, does the noncompete agreement arise from the sale of a business? In those situations, courts give the employer greater protection from competition than if the noncompete agreement appeared in an employment contract. Another factor to be considered is the reason for the termination of employment. Did the employee resign, or was the employee terminated without cause?
Employers have the right to prevent former employees from disclosing confidential information to unauthorized people. Confidential information includes trade secrets, customer lists, marketing plans and internal financial information. Many employers have contracts preventing the disclosure of confidential information. However, even without a contract, employees should not disclose an employer’s confidential information.
The issues raised by noncompete and confidentiality agreements are extremely complex. Therefore, you should consult a lawyer knowledgeable about these agreements if you are interested in deciding whether your noncompete or confidentiality agreement is enforceable or not.
Get answers to your questions about noncompete and confidentiality agreements
Whether you are an employer drafting a noncompete agreement or an employee with questions about the terms of your contract, we invite you to contact us online or call Limitone & Hillenbrand at 973-539-6122 for a consultation.