Legislation to Invalidate Certain Non-Compete Agreements Introduced in New Jersey
Earlier this month, a new bill, A3970, was introduced in the New Jersey State Assembly by Assemblymen Peter J. Barnes, III, Joseph V. Egan, and Wayne P. Deangelo limiting the enforcement of certain provisions in employment contracts if the individual is eligible for unemployment compensation. It is unclear if the bill will ultimately pass, and be signed into law by the Governor, but there appears to be support within the state Assembly and Senate. The bill provides that if an unemployed individual is found to be eligible to receive unemployment compensation benefits, that individual shall not be bound by any covenant, contract, or agreement not to compete, not to disclose, or not to solicit. The bill only applies to agreements entered into AFTER the date of enactment.
Given the uncertainty raised by this very broad bill, employers are urged to enter into these types of agreements for all important employees with access to confidential information as soon as possible. In addition, assuming the bill passes, it will be important to provide for some type of garden leave or attempt to structure severance payment over time, so that the former employee may not be deemed eligible for unemployment during the term of the non-compete/non solicitation.
We will continue to monitor the bill and provide any updates as they become available.