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Breach of Restrictive Covenants

Breach of Restrictive Covenants

Generally, a non-compete agreement, also referred to as a restrictive covenant, takes either or both of two (2) main forms. The first form restricts an employee’s ability to work for another employer in the same field in a given geographic area or geographic radius from the prior employer’s location of business for a designated period of time after that employee leaves the employer or is terminated by the employer. The second form restricts for a designated period of time an employee’s ability to solicit, contact or communicate with clients or customers of a prior employer after moving to new employment. There are also other forms of restrictive covenants which may or may not be reasonable.

The New Jersey Supreme Court set forth a three-part test to determine the enforceability of restrictive covenants. As noted by the New Jersey Supreme Court, a restrictive covenant “will generally be found to be reasonable where it simply protects the legitimate interests of the employer, imposes no undue hardship on the employee, and is not injurious to the public.” Solari Industries, Inc. v. Malady, 55 N.J. 571, 576 (1970).

New Jersey courts have been consistent in their validation of restrictive covenants which impose reasonable limits on former employees joining competitors, especially where the restrictive covenant is contained in non-competition agreements. See Cmty. Hosp. Group, Inc. v. More, 183 N.J. 36, 51-55 (2005). In addition to considering what interest the employer is attempting to protect when determining the reasonableness of a restrictive covenant, a court may consider the nature of such restrictions, specifically whether they are reasonably limited in duration and geographic extent. A. Hollander & Son, Inc., 2 N.J. at 247-249; Chas. S. Wood. & Co. v. Kane, 42 N.J. Super. 122, 124 (App. Div. 1956); Silbros, Inc. v. Solomon, 139 N.J. Eq. 528, 529 (Ch.1947).

Similarly, non-solicitation and other forms of restrictive covenants must be evaluated in terms of the relevant case law as to reasonableness

We are prepared to represent our clients in prosecution of, or in defense of, injunctive and civil enforcement proceedings related to the alleged breach of non-competition agreements and restrictive covenants.