New Jersey Non-Disclosure and Non-Compete Agreement Attorneys
You have spent hours and money to train your employees. That’s what employers have to do to stay in business.
As an employee, you have (or may be) asked to sign a non-competition agreement or else be “fired”.
What about confidential and proprietary information? How do you protect your business from employees who want to take this classified and protected information to unfairly compete against you? Can you refuse to sign? As an employee, what rights do you have to address an oppressive, unreasonable non-compete agreement?
A non-competition agreement, drafted appropriately, can protect your business from employees using or sharing your confidential and proprietary information with your competitors. However, employees also have rights to refuse unconscionable employee restrictions and covenants. At Hanlon Niemann & Wright, our attorneys advise employers and employees about problems that can create liability and legal difficulties now and in the future.
Are Restrictive Covenants in the Workplace Enforceable in NJ?
“Agreements not to compete” are enforceable under appropriate circumstances. New Jersey protects an individual’s right to pursue one’s profession or livelihood and a covenant not to compete following the termination of employment is critically evaluated and will be enforced if it is reasonable under all the circumstances of the particular case. The key phrase here is “if it is reasonable under the circumstances of the particular case.” A determination of reasonableness generally requires the findings that the agreement (1) simply protects the legitimate interests of the employer; (2) imposes no undue hardship on the employee; and (3) is not injurious to the public.
Legitimate Interests of the Employer
The law in NJ is clear that an employer has no legitimate interest in preventing legitimate business competition. However,
an employer has a patently legitimate interest in protecting his trade secrets as well as his confidential business information and he has an equally legitimate interest in protecting his customer relationships.
Matters of general knowledge within the industry, generally adopted and used means and methods of operation, customer lists generally accessible to the public or industry personnel are not trade secrets or confidential information warranting protection. Professional skills or expertise developed during the term of employment are also largely unprotected:
[A] postemployment restriction on an employee requires special justification which is nonexistent where the harm caused consists merely in the fact that the new employer becomes a more efficient competitor.Trade Secrets and Non-Disclosure Agreements
The NJ Supreme Court has identified six factors to determine what is a practicable trade secret: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) efforts made by the owner to guard the secrecy of the information; (4) the value of the information to the business and competitors; (5) the effort or money spent in developing it; and (6) the ease or difficulty others would have in duplicating or acquiring the information.
The scope and duration of the agreement is also relevant in determining whether it may be enforced.
Whether a limiting or total covenant is equitable, fair, just and reasonable in respect of time or territory or both in its relation to the parties is essentially an inquiry of the facts concerning why the covenant was mandated and is not just a simple matter of law for a judge to decide without facts for or against its’ recognition.
Undue Hardship on the Employee
A mere showing of personal inconvenience or financial hardship does not automatically qualify as an “undue hardship” sufficient to prevent enforcement of an agreement not to compete. Factors identified by the Supreme Court as relevant to the inquiry are (1) the likelihood of the employee finding work in his field elsewhere; and (2) the reason for the termination of the relationship between the parties to the employment contract.
Let’s look at each criteria. The first factor—likelihood of the employee finding work elsewhere will depend on the scope of the agreement. The broader the geographic area and scope of restrictions in the employment marketplace of the employee and the longer its duration, the more likely it is to hinder the employee’s re-employment. The second factor—cause of termination of the employment relationship—places a high premium on the employer’s motives and reasons for the termination. The employee’s lack of guilt, coupled with the involuntary nature of his or her termination, are significant factors. The analysis outlined in several leading cases offers some guidance to those of you dealing with this issue:
Where [the termination of employment] occurs because of a breach of the employment contract by the employer, or because of actions by the employer are detrimental to the public interest, enforcement of the covenant may cause hardship on the employee which may fairly be characterized as wrongful in that the employee has not, by his conduct, contributed to it. On the other hand, where the breach results from the desire of an employee to end his relationship with his employer rather than from any wrongdoing by the employer, a court will be hesitant to find undue hardship on the employee, he in effect having brought that hardship on himself.
Injury to the Public
I’m often intrigued when phrases like “injury to the public” are used as legal criteria to evaluate a case. Determination of the extent of injury to the public from any particular restrictive agreement is a fact-intensive inquiry. Courts have identified the following factors as pertinent subjects of public concern: (1) the effect of enforcement of the agreement on availability of the goods or services to which it pertains; (2) the effect of non-enforcement on the investments made by the corporation in its long-term research and development programs.
Enforcement of Restrictive Covenants Signed After the Employment Relationship Has Started
An employer’s offer of employment or continued employment has been found to be sufficient consideration to enforce a reasonable restrictive agreement. So, if an at-will employee is asked to sign a restrictive agreement after the start of his or her employment, the defense of “void for lack of consideration” is likely to fail. NJ takes the position that an employer’s right not to exercise its right to terminate an employee in consideration of signing the post-employment agreement is sufficient.
Is a Covenant Not to Compete, Trade Secret, and Non-Disclosure Agreement an issue to you as an employee or as an employer involved with a terminated or separated employee? If so, then please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office. We represent both employers and employees in NJ and can offer you an objective and beneficial analysis of the covenant not to compete and its enforceability.
NJ Employment Law and Covenants Not to Compete Video
What Should You Do as an Employee Who is Asked to Sign a Non-Competition Agreement?
Call us right away. Not all employees should be asked to sign a non-compete agreement. Employees who are not upper management and do not have a unique function in the company typically should not be asked to sign a restrictive agreement since it is difficult to establish a legitimate business purpose in doing so and may prevent the individual from being able to make a living.
If you are an employee who has been working at a company for months or even years and is now asked to sign a non-compete agreement, is it enforceable? A non-compete agreement, like any contract, is not enforceable without offering new compensation (i.e., consideration) or benefits to the employee for signing it. It is important to remember that enforceability will depend (in part) on whether a restrictive covenant serves an essential and important business interest for the employer and whether some sort of compensation (financial or other) has been given in exchange for signing a restrictive agreement.
Fredrick P. Niemann Esq.
As an example, asking the President of the company or a key upper management person to sign a non-compete agreement is different than asking a clerical staff person to sign a non-compete; the former can leave the job and find higher-level non-competing employment whereas the latter, in most cases, cannot.
If you need advice or have questions about restrictive employment or covenants or non-compete agreements in NJ, call Fredrick P. Niemann toll-free at 855-376-5291 or e-mail him at fniemann@hnlawfirm.com.
Don’t let New Jersey’s complex employment laws keep you from exercising your rights.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Employment Law Attorney
NJ Employment Law Attorney serving these New Jersey Counties:
Monmouth County, Ocean County, Essex County, Cape May County, Camden County, Mercer County, Middlesex County,
Bergen County, Morris County, Burlington County, Union County, Somerset County, Hudson County, Passaic County</