What Restrictive Covenants Are Valid in New Jersey Employment?

In 2024, the Federal Trade Commission (FTC) instituted a sweeping ban on non-compete agreements, drastically altering many employment contracts nationwide. However, even in the wake of this significant regulatory change, employers in New Jersey still have access to other types of restrictive covenants that, when properly drafted, remain enforceable. These include non-disclosure agreements (NDAs), non-solicitation agreements, and non-poaching agreements. Each of these covenants can significantly impact an employee’s actions, so it’s vital to fully understand their rights and obligations.

Non-disclosure agreements (NDAs) are designed to protect a company’s confidential information, such as trade secrets, client lists and proprietary business strategies. NDAs remain a lawful tool for employers to safeguard sensitive information. For an NDA to be enforceable in New Jersey, it must be reasonable in scope, meaning it should not impose undue restrictions on the employee’s ability to use general knowledge and skills gained during employment. Additionally, the duration of the NDA should be limited to a period necessary to protect the employer’s legitimate interests, typically ranging from one to three years. The geographic area covered by the NDA should also be appropriate, taking into account the nature of the business and the reach of the confidential information.

Non-solicitation agreements prevent employees from poaching clients, customers or other employees after leaving a company. To be enforceable in New Jersey, they must be reasonable in scope, duration and geographic area. A non-solicitation agreement should specifically define the clients or employees that are off-limits and should not overly restrict the former employee’s ability to work in their field. Courts in New Jersey generally enforce non-solicitation agreements that last for a period of one to two years, but the specific duration may vary depending on the circumstances. The geographic area should also be limited to where the employer has a legitimate business interest to protect, preventing overly broad restrictions that could have the same effect as a non-compete clause.

Non-poaching agreements prevent former employees from recruiting their ex-colleagues to a new company. They remain lawful in New Jersey but only if reasonable in scope, duration, and geographic reach. A non-poaching clause should be narrowly tailored to protect the employer’s interests without excessively limiting the former employee’s actions. For example, the agreement might be limited to certain key employees or departments and last for a defined period, such as one to two years. Geographic limits should be relevant to the employer’s business operations and not unnecessarily broad.

Faced with the FTC’s 2024 ban on non-compete agreements, some employers may attempt to craft NDAs or non-solicitation or non-poaching agreements that mimic the effects of non-compete clauses. For example, they might be written so broadly as to effectively prevent an employee from working in their industry. Given these risks, employees should have employment agreements reviewed by a qualified New Jersey attorney, who can ensure that any restrictive covenant complies with the federal non-compete ban and does not unfairly restrict the employee’s future employment opportunities.

The dedicated employment law attorneys at Deutsch Atkins & Kleinfeldt, P.C. in Hackensack, New Jersey routinely advise employees on negotiating, following, and challenging restrictive covenants. To schedule a confidential consultation, call 551-245-8894 or contact us online.