Restrictive Covenants and Non-Compete Agreements
A restrictive covenant or non-compete agreement is a type of employment contract that protects an employer’s business interests should an employee leave their job. The contract, typical to business law, will restrict an employee from working within their industry or for a competitor in a specified geographical area for a period of time determined by the employer. Failure to abide by the terms of the contract could lead to injunctions and expensive litigation. In New Jersey, non-compete agreements are enforced by the courts. In some cases where restrictions are unreasonable, the courts will modify the agreement instead of rendering it null and void.
Because a non-compete agreement places restrictions on the future employment opportunities of the employee, it is imperative to seek legal counsel for contract litigation.
Types of Restrictions are Included in a Non-compete Agreement
New Jersey law enforces restrictive covenants and non-compete agreements that are reasonable. When an employee leaves a company and is accused of violating their non-compete agreement, an employer can get an injunction to prohibit the former employee from working for a competitor or from soliciting their employees or clients. In some cases, the employer may be able to get a restraining order against the former employee that would prevent them from working for a competitor. Lengthy and costly litigation can proceed.
With this in mind, it is beneficial for the employer and the employee to enter into a non-compete agreement that has reasonable restrictions. These can include:
- Reasonable Time Limits for the Non-Compete Agreement: Employers need to establish a reasonable amount of time to enforce the restrictions stated in the restrictive covenant. A one to two year time frame that prohibits a former employee from working in their industry, for a competitor, or from soliciting clients of the employer is legitimate. Open-ended time limits or those that impose limits of five years or more are generally modified by a court of law. The time limits should protect the employer without imposing undue burdens on the employee.
- Fair Constraints on the Geographic Area in the Restrictive Covenant: Employers can specify geographic areas in the restrictive covenant that prohibit an employee from seeking work or starting their own competing business within that same area. These restrictions can severely limit an employee’s future job opportunities. Restrictions on geographic regions should take into consideration the type of industry involved and the direct impact the competition would have on the employer.
- Acceptable List of Competitors: A non-compete agreement is much more enforceable when it includes a specific list of competitors for which the employee cannot work. By defining competitors, employers can best protect their trade secrets and business interests while limiting the restrictions placed upon the employee. Employers can also include restrictions on what type of business ventures the former employee can enter into if the business would be in competition with the former employer.
Cherry Hill Employment Lawyers at McOmber McOmber & Luber, P.C. Counsel and Negotiate Restrictive Covenants and Non-Compete Agreements for Employees
If you are asked to sign a non-compete agreement or restrictive covenant, the experienced and highly skilled Cherry Hill employment lawyers at McOmber McOmber & Luber, P.C. can ensure that your contract is fair and reasonable. These types of contracts can significantly restrict your career and future job opportunities. Before you sign, let our lawyers help you negotiate an agreement that suits your best interests.