IS A COVENANT NOT TO COMPETE ENFORCEABLE AGAINST A FORMER FRANCHISEE WHO TERMINATES HIS FRANCHISE AND OPENS A NEW, NON BRAND NAME, STORE? (Part II)

By Fredrick P. Niemann, Esq. a New Jersey Covenant not to Compete Attorney

New Jersey courts will not enforce contracts that it finds violate public policy.  “No contract can be sustained if it is inconsistent with the public interest or detrimental to the common good.

However, in an employment context courts have traditionally been reluctant to not enforce a covenant not to compete.  Thus, courts have upheld covenants not to compete where it found that the prohibition was (1) “reasonably necessary for the protection of the business of the employer,” was (2) “not unreasonably restrictive in point of time or territory upon the rights of the employee,” and (3) “not prejudicial to the public interests.”    Additionally, even in a case where the court deemed a covenant not to compete to be overbroad the court did not invalidate the entire covenant.  Rather, the court modified the covenant and partially enforced it “to the extent reasonable under the circumstances.   The court essentially balanced the legitimate concerns of the public, the employer, and the employee. 

Success in beating a covenant not to compete depends on whether a court will find, based on the above listed factors, the covenant to be unreasonable, or against public policy.  As stated above, courts are more likely to enforce a covenant not to compete in an employment context.  Thus, success in a case may very well hinge on whether a court will find the franchise agreement to be analogous to an employment agreement, whether a court will find the terms of the covenant to be reasonable, and whether a court will find that the covenant does not go against public policy.

Contact me personally today to discuss your covenant not to compete matter.  I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns.  You can reach me toll free at (855) 376-5291 or e-mail me at fniemann@hnlawfirm.com/.

Posted in Business, Covenant Not to Compete and tagged , , , , .