Whether they operate their own business or manage a firm, New Jersey employers are probably familiar with non-competition, or "non-compete" agreements. Businesses use these contracts to control where an employee can work, or what kind of work they can perform after leaving their current employment to avoid having trade secrets revealed or a former employee go to work for a competitor. Non-compete agreements vary in their terms; while some require that an employee not work for a competing business, others merely call for a former-employee to refrain from soliciting customers.
Whether they hire on an at will employment basis or their employees are subject to termination for cause, New Jersey employers may benefit from non-compete agreements.
Non-compete agreements are used in many fields, including information technology and sales. Employers should also be aware that in hiring a new worker, a previous non-compete agreement can restrict a potential employee if he or she has disregarded or forgotten a prior contract. Some employers use one contract for all employees, but experts say: the more narrowly-tailored a non-competition agreement, the better.
If a non-compete agreement becomes the subject of litigation, New Jersey judges typically weigh the benefits of the agreement to an employer against the potential harm to a former worker.
Non-competition agreements become enforceable when someone voluntarily leaves a position, or in cases where a worker is laid off or claims wrongful termination. In these instances, besides proving monetary damages, employers must usually prove that an employee's breach of a non-compete will harm the employer's reputation, products or interests. However, as long as a non-competition agreement is narrowly drafted, specific to a company's business interests, reasonable in time, scope and geography and does not restrict a former employee's ability to earn a living, it will likely be deemed enforceable.
To protect their company's assets and financial investment in their business and employees, many employers find that requiring employees to sign a non-competition agreement is worthwhile. Most employees willingly sign these contracts, and employers should remember that they have ultimate discretion to choose whether to implement or enforce a non-compete.
Source: Worcester Business Journal Online, " Non-compete agreements may restrict employees' mobility, but experts say they have benefits," Jacquelyn Gutc, Sept. 3, 2012