The New Jersey Senate recently introduced a bill that would make it tougher for employers to create and enforce non-compete agreements, or restrictive covenants within employment contracts. Under Senate Bill 3518, non-compete agreements would not be enforceable for certain workers who are currently subject to them. Also under the bill, non-compete agreements will have to meet ten different criteria to be enforced. Opponents of the bill say the changes will prevent them from protecting their business interests, allowing employees to share inside knowledge with competitors.
Bill 3518 and Employee Eligibility
Under the proposed legislation, certain categories of workers will be exempt from non-compete agreements, including:
- Independent contractors
- Temporary or seasonal workers
- Workers considered nonexempt under the Fair Labor Standards Act
- Workers making less than $62,000 a year
- Workers who have been employed less than a year
- Workers who have been laid off without cause
Ten-Point Non-Compete Eligibility Criteria
Under Bill 3518, non-compete agreements will only be enforceable if they meet ten requirements. Notable restrictions on the ten-point checklist include:
- Non-compete agreements will be limited to a 12-month period following an employee’s termination.
- Non-compete agreements will only apply to the geographic area covered by the company. Former employees are not prevented from seeking work outside of New Jersey.
- Employees will not be penalized for challenging a non-compete agreement in their employment contract.
Financial Cost of Non-Compete Agreements
Employers will face steep financial obligations if they choose to enforce non-compete agreements under this bill. They will be obligated to pay former employees 100 percent of their pay after their termination during the time a non-compete is still in effect. Employers will also have to pay for additional employee benefits, including vacation and sick leave, medical insurance, and pension benefits, if that employee is restricted from working for a competitor.
Employers would be required to notify workers of their intent to enforce a non-compete agreement in writing within ten days of termination, unless that worker was terminated for a reasonable cause. Employers are also required to post a copy of the bill in the workplace. Bill 3518 must pass the full New Jersey legislature before moving up to the Governor for consideration.
Red Bank Employment Lawyers at McOmber McOmber & Luber, P.C. Advise on Non-Compete Agreements
An unfair or unreasonable non-compete agreement can severely limit your ability to obtain employment should you resign or be terminated. Before you sign a restrictive covenant, it is important to have a skilled Red Bank employment lawyer review your employment contract to ensure it is fair and legal. We counsel New Jersey workers and employers on non-compete agreements, thus saving them from costly litigation.
To discuss your restrictive covenant with an experienced Red Bank employment lawyer at McOmber McOmber & Luber, P.C., Call our Red Bank office at 732-842-6500, our Marlton office at 856-985-9800, our Newark office at 973-878-9040, or contact us at 888-396-0736 or online.
We serve residents throughout the state of New Jersey, including those in and around Middletown, Long Branch, Old Bridge, Freehold, Hazlet, Howell, Wall, Brick, Edison, and East Brunswick.