Frequently Asked Questions (FAQ) About Covenants Not to Compete
You have questions that deserve answers. I’ve listed the most frequently asked questions by our clients with sensible and generally applicable answers. Remember though, nothing is better than a face to face open discussion with me about your matter. Together we can work it out.
Can a Former Employee Compete Against His or Her Former Employer?
The answer is generally yes but a new law has seriously limited an employer’s ability to enforce covenant against certain non-exempt lower level employees. See the page entitled “Competing Against Your Employer: Is It Allowed?” A former employee may compete with his or her former employer by accepting employment with a competitor or may start up his or her own competing business.
This includes soliciting the customers of the former employer. Such conduct is prohibited, however, under limited circumstances which requires a close legal review by a qualified and experienced NJ covenant not to compete attorney.
Are Trade Secrets Protectable in NJ Under a Covenant Not to Compete?
A trade secret is “a formula, process, device or compilation which one uses in his/her business and which gives him or her an opportunity to obtain an advantage over competitors who do not know or use it.” A trade secret may take many forms, from a program for a sophisticated software application to a customer list. Trade secret protection in NJ will not be afforded to matters of common knowledge to the public or generally known within the competitive industry. Further, the subject matter sought to be protected as a trade secret must be confidential or secret.
Can Confidential Information Including Customer Lists Be Protected in NJ Under a Properly Written Covenant Not to Compete?
Confidential information isn’t just information that is “highly classified”. It can be broader than just trade secrets and includes information acquired through the course of employment as a result of the employee’s relationship with his/her employer. Whether information is “confidential” is based on whether legal protection should be recognized and protected by the courts on behalf of the employer against disclosure of important business methods, records and customer lists. Although customer lists are not always protected in every business or industry sector, in certain industries, client lists are deemed protectable in New Jersey.
In addition, when an employee is intimately involved with the creation and/or development of products and systems, etc., and his/her knowledge is sufficiently detailed that he/she could duplicate those products or services from memory, a NJ court may afford injunctive relief in order to protect the employer’s interest.
Is Raiding a Competitor’s Employee(s) Actionable in NJ?
Can you recruit that co-worker or a key employee of a competitor in New Jersey? The answer is tricky and very fact and business specific. Employers need be cautious and take a good look at how they have treated their employee because a court may refuse to grant the employer relief where the employer has treated the employee unfairly.
Generally, a former employee can solicit their former co-workers, and any competitor can recruit your employees, if he or she does not cause the co-workers to breach an employment contract or cause excessive harm when multiple employees resign en masse. In a reported NJ case, a competitor was found to have tortiously interfered with a target company’s economic advantage where the competitor hired all the target company’s sales force who were employed as door-to-door salespeople. The competitor had secretly targeted the company’s district manager who in turn solicited his salespeople while the district manager was still employed by the target company. The court found that this deception combined with the “planned campaign of mass recruiting” constituted malicious interference which entitled the targeted company to relief.
WHAT ABOUT THE OFFICERS, DIRECTORS AND HIGH LEVEL EMPLOYEES OF A NJ CORPORATION OR NJ BUSINESS; WHAT OPTIONS DO THEY HAVE?
Officers, directors and high-level employees also have a duty not to compete with their employer. In fact, a “key employee” is often looked at differently by the courts. Breaches of confidentiality by a key or senior employee with access to private information, marketing plans and business strategies will be looked at uniquely and differently from other employees. Officers, directors and high level employees also have rights to change employers and careers without legal liability to their former employer. If you are an upper management employee, officer or person with significant influence in the enterprise and are subject to a “Covenant Not to Compete”, contact me immediately to discuss your options and strategies.
The attorneys associated with Fredrick P. Niemann, Esq. and the Hanlon Niemann law firm are experienced covenant not to compete attorneys.
This area of the law is complex. You should meet with Fredrick P. Niemann of Hanlon Niemann & Wright when the issue of employee recruitment from a competitor is being considered. Fredrick P. Niemann can be reached toll-free at (855) 376-5291 or by emailing him at firstname.lastname@example.org. Let our employment law experience work for you. We are available to advise and assist you.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Covenant Not to Compete Attorney