Non-compete agreements are increasingly an issue for workers at all levels of the workforce. In general, non-compete agreements are included in paperwork at the beginning of employment. They restrict where you can work after that job ends. Such agreements may limit your ability to use knowledge learned on the job with another employer; limit your ability to get a new job doing the same type of work; and prevent you from working at geographical locations near to you.

Under long-term New Jersey law, there are limitations on such agreements. The employer may not use restrictions to reduce competition, although they may be used to protect information about customers and trade secrets.

Such non-compete agreements should not violate the public interest or create an undue hardship. If the employer restriction causes an undue hardship—for example, the employer attempts to restrict your employment after firing you—that may result in the restriction not being enforceable. At the end of employment, the employer may not coerce you to sign such an agreement as a condition for receiving your last paycheck or owed vacation time.

On May 30, 2023, the National Labor Relations Board (NLRB) confirmed additional ways to challenge non-compete agreements. In particular, the NLRB set forth the view that the use, maintenance, and enforcement of non-compete provisions in employment contracts and severance agreements violate the National Labor Relations Act except in limited circumstances.

Overbroad non-compete agreements are unlawful because they prevent employees from exercising their rights under Section 7 of the National Labor Relations Act, which protects employees’ rights to take collective action to improve their working conditions. Specifically, these agreements interfere with employees’ ability to:

• Collectively threaten to resign to secure better working conditions;
• Carry out collective threats to resign in order to secure improved working conditions;
• Collectively seek or accept employment with a local competitor to obtain better working conditions;
• Solicit their coworkers to work for a local competitor as part of a broader course of protected activity;
• Seek employment, at least in part, to specifically engage in protected activity, including union organizing, with other workers at an employer’s workplace.

Complaints about non-compete agreements can be filed with the NLRB as an unfair labor practice within six months after the issue occurs. Best protection of rights is done through a proactive legal challenge that stops the non-compete application. Either the NLRB or a New Jersey court may be able to find reasons to strike down a non-compete clause. If you have questions about an employer restriction at the beginning of employment through a non-compete agreement or at the end of employment through a severance agreement, you can reach the Workers Legal Rights Project through the LSNJLAW^SM Hotline online at www.lsnjlawhotline.org or by phone at 1-888-LSNJ-LAW (1-888-576-5529).

This information last reviewed: Nov 1, 2023