HNW Business Law, Covenants Not to Compete and Restraints

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

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 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. toll-free at (855) 376-5291 or by emailing him at fniemann@hnlawfirm.com/ to arrange for a legal review of your covenant not to compete.

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