New Jersey joins a rising checklist of states in search of to restrict employers’ use of non-compete and non-solicitation agreements, including to the patchwork of laws on this space.
The New Jersey State Legislature proposed a invoice on Could 2, 2022 that might regulate and severely restrict an employer’s use of non-compete agreements. Particularly, below A3715, all no-poach agreements could be void and non-compete agreements by no means enforceable in opposition to sure sorts of staff, together with interns, apprentices, unbiased contractors, minors, low-wage staff, or staff who shall be employed for lower than one yr. Exterior of this inhabitants, restrictive covenants would solely be enforced if the employer first discloses the phrases of the settlement in writing 30 days earlier than a potential worker’s supply or, for present staff, 30 days earlier than the settlement could be efficient. Publish-employment restrictions may solely final for 12-months and staff should present 10 days’ discover of their intent to implement a post-employment settlement.
The invoice additionally would codify components that are usually evaluated by courts in contemplating the reasonableness of a restrictive covenant, together with geographic attain, scope of actions, and solely imposing restrictions as vital to guard the professional enterprise pursuits of the employer. Official enterprise pursuits explicitly embody commerce secrets and techniques and different confidential enterprise data.
Importantly, the New Jersey invoice , as drafted, wouldn’t be not retroactive; due to this fact, if handed, it could not apply to agreements in place earlier than the act is efficient.
There are similarities between the proposed New Jersey laws and laws enacted in different states. Safety for commerce secrets and techniques is a typical carveout. A number of different states, together with Maryland, Oregon, and Virginia equally outright ban non-compete agreements for “low wage staff,” though every state has a special system for figuring out who qualifies as a low wage worker. Oregon likewise finds all post-employment restrictions that exceed 12 months unreasonable. The New Jersey invoice is likely one of the few proposals or legal guidelines to particularly name out “no-poach agreements,” a rising space of concern and enforcement, notably for the federal authorities.
Though President Biden has, up to now, floated nationwide non-compete laws and it was included as a directive in final yr’s Government Order on Selling Competitors within the American Financial system, that is an space typically regulated by the states. Employers have to maintain a watchful eye on the growing variety of restrictions enacted by statute round america, and particularly, the place they differ. Variations among the many states is much more vital as employers allow extra of their workforce to work remotely. This proposed laws is a reminder for employers to look at each their non-compete insurance policies and distant work insurance policies.