- posted: Oct. 31, 2025
Over the past few years, there have been numerous developments related to the enforcement of employee noncompete agreements. Under the Biden administration, the Federal Trade Commission (FTC) established a rule virtually prohibiting enforcement of these contracts that prevent a former employee from going to work for competitor business. However, this rule was challenged in court, and now the current administration has chosen not to appeal the decision halting the noncompete ban. Accordingly, the FTC will not prevent the use of noncompete agreements, but each state has its own individual rules. Now, some New Jersey legislators are looking to establish a near-total statewide prohibition.
Under the bill referred to as S4385/A5708, most non-compete clauses would be unenforceable, even those agreed to prior to the law’s passage. This measure would go even further than standard noncompete bans by also preventing “no-poach” agreements by which two companies in the same general industry promise not to hire each other’s former workers.
Currently, New Jersey courts use a three-part test when a business seeks to enforce a noncompete agreement. In order to uphold the restriction, all of the following must apply:
The agreement serves a valid business purpose.
The agreement does not impose an undue hardship on the employee.
The agreement does not harm the public interest.
Reasons why an agreement might be held to be invalid include excessive duration, overbreadth in the types of businesses where an individual cannot work and an unreasonable geographic scope.
The proposed legislation does include minor exceptions. For example, extra leeway is given to noncompete agreements negotiated in connection with the sale of a company. Theoretically, someone selling a business can incorporate what they believe to be the value of a noncompetition clause into their sale price.
Existing noncompete agreements involving employees defined as senior executives under the law might also remain enforceable. The bill’s current language says that a senior executive is a worker in a policy-making role with total compensation of $151,164 or more in the year immediately preceding termination.
Though no one can be sure as to whether S4385/A5708 will pass in its current iteration, or if a more limited measure will become law, both businesses and workers should have a thorough understanding of the relevant standards during noncompete negotiations and enforcement efforts. Consulting with a knowledgeable employment law attorney gives you the best chance to assert your rights effectively and avoid unnecessary problems.
Barker, Gelfand, James & Sarvas, P.C. represents South Jersey clients in a wide range of employment law matters. To discuss your particular concern, please call 609-601-8677 or contact us online. Our main office is in Linwood and we meet with clients by appointment in our Pitman and Marlton satellite locations.
- posted: Oct. 31, 2025
Over the past few years, there have been numerous developments related to the enforcement of employee noncompete agreements. Under the Biden administration, the Federal Trade Commission (FTC) established a rule virtually prohibiting enforcement of these contracts that prevent a former employee from going to work for competitor business. However, this rule was challenged in court, and now the current administration has chosen not to appeal the decision halting the noncompete ban. Accordingly, the FTC will not prevent the use of noncompete agreements, but each state has its own individual rules. Now, some New Jersey legislators are looking to establish a near-total statewide prohibition.
Under the bill referred to as S4385/A5708, most non-compete clauses would be unenforceable, even those agreed to prior to the law’s passage. This measure would go even further than standard noncompete bans by also preventing “no-poach” agreements by which two companies in the same general industry promise not to hire each other’s former workers.
Currently, New Jersey courts use a three-part test when a business seeks to enforce a noncompete agreement. In order to uphold the restriction, all of the following must apply:
The agreement serves a valid business purpose.
The agreement does not impose an undue hardship on the employee.
The agreement does not harm the public interest.
Reasons why an agreement might be held to be invalid include excessive duration, overbreadth in the types of businesses where an individual cannot work and an unreasonable geographic scope.
The proposed legislation does include minor exceptions. For example, extra leeway is given to noncompete agreements negotiated in connection with the sale of a company. Theoretically, someone selling a business can incorporate what they believe to be the value of a noncompetition clause into their sale price.
Existing noncompete agreements involving employees defined as senior executives under the law might also remain enforceable. The bill’s current language says that a senior executive is a worker in a policy-making role with total compensation of $151,164 or more in the year immediately preceding termination.
Though no one can be sure as to whether S4385/A5708 will pass in its current iteration, or if a more limited measure will become law, both businesses and workers should have a thorough understanding of the relevant standards during noncompete negotiations and enforcement efforts. Consulting with a knowledgeable employment law attorney gives you the best chance to assert your rights effectively and avoid unnecessary problems.
Barker, Gelfand, James & Sarvas, P.C. represents South Jersey clients in a wide range of employment law matters. To discuss your particular concern, please call 609-601-8677 or contact us online. Our main office is in Linwood and we meet with clients by appointment in our Pitman and Marlton satellite locations.
