what is a restrictive covenant?

Your Right to Work

The United States is experiencing a work shortage with a record number of job openings in the market. However, despite the pandemic, most employees still prefer candidates with several years of experience and a willingness and availability to work in-person, during the evenings, and to work on the weekends.

In such a tight market, where qualified employees are in short supply, employers are relying more and more on restrictive covenants to prevent their employees from resigning their positions or from competing with their employer in the event they seek employment with a competitor.

What Is A Restrictive Covenant?

Restrictive covenants attempt to limit an employee’s ability to compete with his or her employer or to solicit business from their employer. Sometimes, restrictive covenants even limit an employee’s ability to work in the same field or in the same geographical region in the event they resign their position with their employer.

However, restrictive covenants are not absolute. In New Jersey, restrictive covenants are generally disfavored as restraints on trade and are narrowly construed by the Courts. While restrictive covenants are generally enforceable, your right to work and provide for yourself trumps an unreasonable restriction on your ability to work.   Thus, to be enforceable, a restrictive covenant must protect a legitimate business interest of the employer, cannot be unduly burdensome to the employee, and must be in the public interest. Solari Industries, Inc. v. Malady, 264 A.2d 53 (N.J. 1970).

When Are Restrictive Covenants Illegal?

For example, a restrictive covenant will likely be deemed unenforceable where it is too broad in geographical or durational scope. In circumstances where a restrictive covenant is too broad, New Jersey Courts have the ability to invalidate the restrictive covenant or to “blue pencil” the restrictive covenant. In other words, the Courts have the ability to tailor an unreasonable restriction so that it is reasonable and not unduly burdensome on the employee.

In today’s job market, employers are relying more on restrictive covenants and are more likely to enforce them through legal action than ever before. If you are being asked to sign a restrictive covenant as a condition of new employment or are already subject to a restrictive covenant and you are seeking employment with a competitor that would potentially violate those restrictions, you should proceed with caution. Daniel J. Carbone, Esq. has the knowledge and experience to advise you of your options so that you can successfully exercise your right to work without fear of legal consequence.

For guidance on your specific legal issue, contact Daniel J. Carbone at 732-363-0666 Ext. 211, or send him an email at dcarbone@bathweg.com.