Are They Valid? What Are the Legal Standards for Enforceability?
You’ve worked hard to build your business from scratch. You have key employees, who have been essential to the growth and success of your business, but you worry that they may take what they know and open shop across the street, unfairly competing with you after you’ve taught them all you know. Can you require that an employee sign an non-compete agreement in New Jersey (some states, such as California, Oklahoma and North Dakota, will not enforce a non-compete agreement)? What will a court of law require to enforce a non-compete agreement?
The Legality of Non-Compete Agreements in New Jersey
Fortunately, the state of New Jersey recognizes valid non-compete agreements, viewing them as a form of contract. Accordingly, they must meet all the requirements of a valid and enforceable contract:
- There must be an agreement—There must be evidence of an offer and acceptance of that offer. The terms may generally be oral or in writing
- Both parties must exchange something of value (consideration is the legal term)
- The parties must voluntarily enter into the agreement
- The parties must have the legal capacity to enter into a contract—They must know that they are entering into a binding agreement and must be able to understand the terms of the contract
- The subject matter of the agreement must be legal
Additional Requirements for Non-Compete Agreements in New Jersey
When determining the validity (and enforceability) of a non-compete agreement, the New Jersey courts will consider three factors:
- Whether the non-compete agreement protects the legitimate interests of the employer– While the mere prevention of competition will generally not be a legitimate interest, the protection of trade secrets, customer relationships, intellectual property and confidential information may.
- Whether the non-compete imposes an undue or unreasonable hardship on the employee—A non-compete may pose an undue hardship if it is too expansive in geographic scope, duration or restricted activity
- Whether the non-compete is harmful to the public—A non-compete agreement may be injurious to the public if its purpose is to prevent any fair competition
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we provide comprehensive legal counsel to businesses and business owners. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
Named a New Jersey SuperLawyer Every Year since 2010, Including 2022
