As part of doing business, you might routinely ask employees to sign non-compete agreements, in which they agree not to work for competitors within a certain geographic range and within a certain timeframe. The purpose of non-compete agreements is to ensure your business’ trade secrets and other proprietary information is not unduly disclosed to your competitors by a former employer to your detriment.
Non-compete agreements come under fire
While you might only have the best interests of your business in mind when asking an employee to sign a non-compete agreement and wish that employee no ill-will, non-compete agreements have come under public scrutiny lately as being too onerous on employees and stifling the freedom to work and the nation’s economic prosperity.
The state of New Jersey has come out in support of the Federal Trade Commission’s (FTC) proposal to ban all future non-compete agreements in the U.S. and to render existing non-compete agreements unenforceable.
The purpose of the ban is to increase wages and expand career opportunities for millions of workers in the U.S., as well as encourage healthy competition amongst businesses. The ban would also ensure consistency across all states, some of which currently permit non-compete agreements and some that do not.
Ensuring your non-competes are reasonable
As it stands now, however, the FTC’s ban is still only a proposal and may or may not become an official rule. Until we know what the outcome of the proposed ban will be, businesses in Haddonfield can ensure that the non-compete agreements they offer employees are reasonable, to offset the chance the agreement could later be challenged.
Basically, a non-compete agreement in New Jersey must be executed to protect the employer’s legitimate business interests. Also, non-compete agreements in New Jersey must not cause the employee to suffer an undue hardship. Finally, non-compete agreements in New Jersey cannot be drafted in a way that could be considered harmful to the public.
So, it may be necessary to limit the timeframe and geographic scope of your noncompete agreements, depending on the circumstances. Still, as a business you have a right to protect your interests, and a well-drafted non-compete agreement that is not overly restrictive can be key in doing so.