On Thursday, September 29th, Alan Schorr made an impassioned plea to the New Jersey State Senate Labor Committee regarding the importance of curtailing and regulating the use of restrictive employment covenants not to compete. Though he spoke in his role as legislative liaison of the National Employment Lawyers Association of New Jersey, his testimony included his own personal experience with the damage these abusive contracts can cause, and of the need for relief.
The committee’s hearing focused on a pending bill that would significantly change and improve the current employment environment for both employees and employers, as well as for consumers. The State is considering codifying new policies that would restrict the time and terms that can be included in non-compete contracts, as well as which employees could be required to enter into these covenants.
Non-compete contracts were originally created to protect businesses from unfair competition, but in recent years they have evolved into legal vehicles that have prevented workers from being able to earn a living and businesses from hiring talented, experienced employees. Minimum-wage staff of fast-food chains have been barred from seeking a job at other food establishments and skilled workers have been forced to seek training in new occupations out of fear of legal action. While some states have banned the practice entirely, others are taking legal action to level the playing field. New Jersey is considering limiting the time that non-competes are valid to twelve months and requiring employers who use the agreements to compensate restricted workers for the duration of the contract’s enforcement.
In his testimony, Mr.Schorr noted that non-compete contracts are causing innovative businesses and talented workers to leave the state entirely in search of a less restrictive employment environment. He also noted the impact that restrictive covenants imposed by medical groups are having on patients seeking care in the state, telling a highly personal story.
My own mother, who recently died from COPD, had a twenty-year relationship with her pulmonologist. He knew everything about her, and she trusted him. He went to another practice and advised my mother he could no longer treat her. She spent the last painful year of her life being shuffled about by a group of strangers who didn’t know her or care about her. There are a million stories of patients deprived of their gynecologist, psychiatrist, cardiologist, or family medicine doctor of their choice.
In his testimony,Mr. Schorr told the committee that non-compete agreements are also contributing to higher unemployment expenses for New Jersey taxpayers.
Most often, an employer, upon learning that an employee has gone to work for a competitor, has its attorney send a cease and desist to the new employer threatening to sue the new employer. The new employer, fearful of litigation, fires the new employee, leaving the employee unemployed and unable to work in his or her chosen profession for up to two years and dependent on unemployment. Why should New Jersey taxpayers be forced to pay for unemployment so that business can prevent competition?
In his testimony, Mr. Schorr not only represented the National Employment Lawyers Association of New Jersey. He also spoke on behalf of all New Jersey employees and citizens as well. As he told the committee, “The only thing that non-competes do is prevent competition, unfairly reduce wages, and harm New Jersey’s ability to attract and keep innovative business and employees. The entire testimony can be reviewed here.