HOW ENFORCEABLE IS A WRITTEN COVENANT NOT TO COMPETE IN NEW JERSEY

Many employment contracts provide that an employee cannot establish a business or work for a competitor within NJ and/or surrounding states for a specific period of time and in a specific geographic area. These covenants may also include various other restrictions, such as nondisclosure restrictions, non solicitation of employees and/or customers or an agreement not to use existing customer lists.

When evaluating the legality of such covenants, the courts in New Jersey will likely take notice of the consideration given to the employee and the claimed interest of the employer being protected.  If the covenant is being requested for post-employment, namely, the continued right to remain employed by the employer, additional consideration should generally be given to the employee.

The length of time of a restrictive covenant needs to be enforced to be closely evaluated.  Restrictions that impose unjustified durational limits are at risk of being nullified or significantly curtailed. Geographical limitations should likewise be established to cover only the territory or competitive market where an employee's skill and/or knowledge will pose a direct and provable threat to the employer. A general prohibition of all employment and competition against a former employer will generally not be enforced. 

There are, however, legitimate employer interests that are recognized in NJ as protectable.  They include:

1) trade secrets to which an employee has access;

2) confidential information to which an employee has access, or close relationships with customers; or

3) an employee’s services which are special, extraordinary or unique.  The scope of the restraint sought to be imposed on the employee must be reasonable and based upon an employer’s protectable interest.

Please contact employment law attorney, Fredrick P. Niemann, Esq. at (888) 800-7442 or by emailing him at fniemann@hnlawfirm.com

It bears repeating that a legal review and analysis of a proposed or threatened NJ covenant not to compete should be undertaken by a qualified NJ covenant not to compete law attorney.  Contact Fredrick P. Niemann, Esq. today for a confidential evaluation.  He can be reached toll-free at (888) 800-7442 or by email at fniemann@hnlawfirm.com.

ENFORCEABILITY OF A RESTRICTIVE COVENANT IN NEW JERSEY

The law in NJ on the enforceability of covenants not to compete is highly fact sensitive.  Covenants which are overly broad and/or punitive are not generally enforceable.  Although New Jersey subscribes to the "blue pencil doctrine” which will rewrite a restrictive covenant (with the least restrictive impact to the employee), covenants which are too overreaching are still at risk.  A restrictive covenant can be considered reasonable by the courts in NJ if: a) the employer interest deserves protection, b) the time and geographic area of the restriction does not impose an undue hardship on the employee, and c) the restriction is not injurious to the public.  All four components must be satisfied for the restriction to be enforced. 

Is Your Reason for Imposing a Restriction on Competition and Employment Defensible?

New Jersey has long held that an employer cannot prevent competition.  In order for an employer to establish that his or her interest is protectable, he or she must establish some kind of special interest, such as customer contacts, trade secrets or other confidential information which requires protection.

Is the Length of Time You are Seeking to Impose the Restriction on Competition in New Jersey Reasonable?

Time restrictions will often be upheld if they are limited to no longer than necessary to prohibit an employee from the use of bona fide trade secrets or insider information in a way that would be detrimental to the former employer. In addition, these restrictions are generally upheld when the employee is the employer’s main and direct contact with its customers. Factors which will likely be taken into consideration are the employee’s position, the duration, frequency and consistency of the contact, and how long it will take the employer to replace the employee. A court will consider whether the restriction is necessary to protect the employer’s legitimate business interest and whether the durational restrictions are broader than necessary to protect the employer’s interest.

NJ courts will also consider the employee’s interest which includes the hardship that will be experienced by the employee if he is unable to work in his field.

Is There a Public Interest to Be Protected?

A Competing Public Interest in a NJ Will Always Trump a Covenant Not to Compete

The New Jersey courts will balance the employer’s interest against the employee’s interest, and the public’s interest.  Depending on the analysis, the public interest cannot be materially and adversely impacted if a covenant is to be enforced.  Please contact employment law attorney, Fredrick P. Niemann, Esq. at (888) 800-7442 or by emailing him at fniemann@hnlawfirm.com to arrange for a legal review of your covenant not to compete.

PARTIAL ENFORCEABILITY OF A NJ COVENANT NOT TO COMPETE

New Jersey’s Blue Pencil Doctrine

The blue pencil doctrine, as adopted by the New Jersey courts, permits a court to limit the scope of a covenant by striking out specific sections of the covenant.  Under this doctrine, a court will effectively, "rewrite” an unenforceable or overly-broad portion of the covenant, if the covenant is physically capable of being limited by striking out text and still leaving a limited restrictive covenant intact.  The blue pencil doctrine requires counsel to closely evaluate all of the facts and competing interests implicated in the language of the covenant.

An experienced NJ business law attorney who understands covenants not to compete in NJ is essential to any proposed blue pencil rewrite by the courts of NJ.  Contact Fredrick P. Niemann at 888-431-8567 or email him at fniemann@hnlawfirm.com