The passage of the legislation, with all these proposed requirements, would likely significantly reduce the popularity and prevalence of non-compete agreements in New Jersey. However, even if the most dramatic provisions are removed, the adoption of legislation that clearly establishes the rules for binding agreements could help clarify agreements that are not applicable to their faces, protect workers from the obligation to enter into unfair agreements, and limit the number of cases to be decided by the courts. Non-compete agreements are caught in two typical situations: employment and the sale of a business. In New Jersey, courts are less motivated to impose non-compete prohibitions on employment than a non-compete agreement that is grappling with the sale of their own business. The reason is that New Jersey has strong public policies to offer individuals the right to work and earn a living. Whether the non-competition agreement was executed in the context of its own employment or the sale of businesses, the New Jersey courts will analyze the adequacy of the restriction of competition to determine whether it should be applicable or not. A pending bill in New Jersey`s legislature would impose new restrictions on the use of non-compete agreements between workers and their employers. When Assembly Bill A1769 enters into force, a number of specific requirements would be defined and will have to comply with non-competition agreements in order to be implemented within the State. Competition prohibitions are used to protect an employer`s interests. They may be appropriate, for example, if a company agrees to invest a lot of money and time in training a worker; in return, the worker may agree not to work for a competitor for a certain period of time.
Another reason for these agreements is the idea that by leaving a company, an employee may have an unfair advantage if he can use the customer relations they have developed or confidential/sensitive information about customer processes, business procedures, trade secrets or their former employer`s marketing/product development plans to compete or work for an independent competitor. In particular, enforceable agreements are not intended to penalize a person for leaving a business by limiting his or her ability to find a future job. In Maw, the applicant was dismissed for refusing to sign the non-competition agreement. She subsequently sued her former employer for breach of public order and under the EPA. It asserted that the agreement did not protect the legitimate business interests of the employer. Moreover, it was not limited to a specific geographical area and was to be effective for two years. In order to ensure the application of a non-compete agreement, the New Jersey courts require that the non-compete agreement (1) protect the legitimate interests of the employer; (2) does not impose unreasonable harshness on the worker; and (3) do not harm the public. A non-compete agreement that amounts to the sale of a business is given more leeway than restrictive agreements that enter into an employment contract. For example, a seller sells a hair salon to a buyer and, as part of the sale, the buyer asks the seller to execute a non-compete agreement prohibiting the seller from working as a hairdresser for five years within a ten-mile radius.