what is a non compete agreement

What Is a Non-Compete Agreement?

By Thomas McKinney

Most of us will change jobs at least one or more times in our lifetimes. Moving from employer to employer is often the mark of progression along a career track. At one point or another, therefore, it is likely that your employer will ask you to sign a non-competition, or “non-compete,” agreement. Such an agreement can have significant consequences for those that choose to or choose not to sign. 

What Is a Non-Compete Agreement?

A non-compete agreement is a contract entered into between an employer and an employee in which an employee agrees to not work for a competitor for a certain time span in the event that the employee leaves the current job. Despite common misconceptions otherwise, a prospective employer is well within their rights to refuse to hire a person who refuses to sign a non-compete agreement. Furthermore, an existing employer can fire a current employee who refuses to sign a non-compete agreement.

Despite the fact that restrictions on employment and competition are generally not favored by the law, non-compete agreements can and will be enforced by a court should they be found to be enforceable pursuant to the relevant legal standards. You see, to be enforceable in a New Jersey court, a non-compete agreement must be supported by three aspects:

  • There is a legitimate interest being protected by the employer: Preventing competition will not be recognized as a legitimate interest to be protected by an employer. An employer, however, may have a legitimate interest in protecting something like trade secrets and other confidential business information. It is also considered a legitimate interest for an employer to have a non-compete in order to protect customer relationships. So, for example, if an employee was hired to develop customer relationships, an employer would likely to be found well within their rights to establish a non-compete agreement restraining the employee from soliciting customers acquired during employment should the employment relationship come to an end.
  • There is not an undue hardship imposed upon the employee: A non-compete agreement must be reasonable to be enforceable. It cannot be unduly restrictive so as to impose an undue hardship upon the employee. This means that the agreement must be reasonable in the geographic, subject matter, and duration of the restrictions it puts on the employee. It should also be noted that courts will be less inclined to find undue hardship should an employee quit his or her job as opposed to the employer terminating the employment relationship.
  • The non-compete is not injurious to the public: This may be the most complicated factor to establish the validity and enforceability of a non-compete agreement. A fact-specific analysis that involves weighing the impact enforcement of the non-compete may have on the availability of goods in services in the relevant industry is required. It also requires an investigation into the impact such an agreement would have on things like corporate investments in long-standing research and development programs.

Employment Law Attorneys

Entering into a non-compete agreement can have serious ramifications. Prior to signing, talk to the trusted team of employment law attorneys at Castronovo & McKinney about your options. Contact us today.

About the Author
Tom McKinney is an experienced NJ Employment Lawyer in all major areas of labor and employment law, including discrimination, harassment, overtime violations, wage and hour claims, sexual harassment, wrongful discharge, Title VII, ADA, ADEA, FMLA, LAD, FLSA, and all other employment law claims. Tom is admitted to practice in the States of New Jersey and New York, United States District Court for the Eastern District of New York, Southern District of New York, District of New Jersey, and United States Court of Appeals for the Third Circuit. Prior to forming the firm, Tom practiced at Gibbons P.C. in Newark, NJ. If you have any questions regarding this article, contact Tom here today.