How can I ensure my company’s non-compete agreement is enforceable?
In recent years, non-competition agreements have been met with some controversy. In the eyes of many, these agreements infringe on the free market. However, for employers, non-competition agreements are a vital component to protecting confidential information. In many states, laws and court rulings have limited the enforceability of non-compete agreements. Now, one New Jersey lawmaker is seeking to further limit the ability of employers to utilize non-competition clauses.
N.J. May Restrict Non-Compete Agreements
New Jersey State Senator Bob Gordon has proposed several rules that would apply to businesses in the state in an effort to assist workers who currently feel obligated to sign onerous non-compete agreements when they take a new job. Gordon has publically stated that he was inspired to draft the bills when he met with a constituent who struggled to find a new job after being laid off due to the non-compete agreement he signed with the former employer.
Currently, it is estimated that nearly 20 percent of all employees sign non-competition agreements, according to a study by the University of Maryland’s business school. While traditionally non-compete agreements were favored by employers offering skilled careers in the tech industry, now employers working in even fast food restaurants are often forced to sign such an agreement.
Under the proposed N.J. legislation, businesses would be limited to requiring non-compete agreements to protect their legitimate business secrets. Low wage employees, college students, and seasonal or temporary workers would be exempt from signing. Even further, the bill would require companies to pay former employees their full salary and benefits for the entire duration of the non-compete agreement, unless the employee is fired for cause.
Drafting an Enforceable Non-Compete Agreement
As legislators weigh the proposed New Jersey bill and New Yorkers wait to see whether the state will take similar action, employers can take steps now to draft a strong non-compete that will likely be enforced. Enforceable non-compete agreements are limited in their duration and scope. Employers should consult with a non-competition agreement lawyer for assistance in drafting an agreement that restricts just the geographic area necessary and does not last for an indefinite period of time.