In the face of increasing concerns about non-compete agreements and their negative impact on employees’ abilities to earn a living, a nationwide movement has emerged, aiming to eliminate their most egregious restrictions. Last week the New Jersey Assembly Labor Committee considered Assembly Bill No. 1650. The bill aims to eliminate most and severely restrict the remainder of non-compete agreements. The bill opposed by many organized business groups. Alan H. Schorr, representing the National Employment Lawyers Association – New Jersey (NELA-NJ) gave forceful testimony in favor of the Bill. The bill passed through the committee by a vote of 6-3 and will move on for consideration by the full state assembly.
The original theory behind a non-compete agreement is that it protects an employer from the potential damage an employee using their trade secrets, intellectual property, proprietary training or client relationships could cause. But many non-compete agreements have expanded over the years to become unreasonable and overly restrictive, preventing low-level employees such as sandwich makers and salon workers from seeking alternative employment that utilizes their occupational experience. Individual employees fearing legal jeopardy have been unable to support their families or have been forced to move away from their communities as a result of non-compete agreements that they’ve been required to sign as a condition of employment.
In 2017, the New York Times profiled the growing problem of non-compete agreements run amok, calling it “a broad shift in which companies assert ownership over work experience as well as work.” To put an end to what has grown into a form of “indentured servitude,” the National Employment Lawyers Association of New Jersey supported Assembly Bill No. 1650, speaking to the significant difference that it will make for workers. Among the most notable changes that the bill would create are:
- A requirement that the employer who controls a non-compete agreement pay the employee an amount equal to 100 percent of the pay that the employee would have received for work performed during the period of the agreement, including benefits contributions.
- A prohibition of enforcement of non-compete agreements involving nonexempt employees; interns who are undergraduate or graduate students hired for short-term relationships; apprentices working as part of government apprenticeship programs; seasonal or temporary employees; independent contractors; employees under the age of 18; employees of less than one year; low-wage earners
- Non-compete agreements that are deemed not overly restrictive in scope cannot exceed 12 months after the termination of employment.
- Employees have the right to consult with an attorney about a non-compete agreement they’re asked to sign prior to signing.
The law includes numerous other protections meant to level the playing field between employers and employees. Notably, several employer groups testified or submitted written testimony against the bill, claiming that its terms jeopardize the success of New Jersey businesses, but testimony from and about those who have been harmed by overly broad and restrictive contractual language proved more persuasive.
We will continue to fight on behalf of New Jersey workers. If you have been victimized by a non-compete agreement and would like to discuss your options, contact our firm today to set up a time for a consultation.