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Are non-compete agreements legal in New York and New Jersey?

On Behalf of | Jun 7, 2022 | Employee Rights |

Negotiating an employment contract during onboarding is important for both the employer’s security and a worker’s financial future. Companies want to reduce risks while attracting the best talent out there. Workers want to minimize their sacrifices and compromises while maximizing what income and benefits they receive for their work.

One concession that often causes employees and employers to butt heads during contract negotiations is the non-compete agreement often included in a new-hire packet. A non-compete agreement is a restrictive covenant that prevents an employee from competing with their employer when they leave the company.

A non-compete agreement will prevent a worker from starting their own company in the same field or from working for a direct competitor. Obviously, there can be major career limitations for someone subject to a non-compete agreement. Are these documents enforceable in New Jersey and New York?

Both states currently allow non-compete agreements

New York law allows for non-compete agreements and similar restrictive covenants, provided that they are necessary for the protection of business and do not impose an undue hardship on the worker. Typically, there needs to be a reasonable limitation on the non-compete agreement for it to be enforceable in the New York civil courts.

The same is true in New Jersey. Non-compete agreements are most likely to hold up under court scrutiny when a worker received something of valuable consideration for the concession and when an agreement only applies in a specific industry, in a specific geographic location and for a specific amount of time.

While New Jersey lawmakers have introduced legislation to adjust the rules that apply to non-compete agreements, such legal changes can take years to change the general business practices in the state.

What does non-compete enforcement involve?

For a company to enforce a non-compete agreement, they need to file a lawsuit against the worker that they claim violated the agreement. They can then ask the courts to enforce the contract. They can limit someone’s economic activity and possibly convince the courts to award them damages depending on the terms of the agreement and the context of the specific situation.

Learning more about non-compete agreements and employment contracts will help both workers and the companies that employ them better protect themselves.