New Jersey Assembly Introduces Bill To Invalidate Restrictive Covenants And Non-Disclosure Agreements For Employees Eligible For Unemployment

The New Jersey Assembly recently introduced a bill (A3970) which if enacted, would eviscerate New Jersey employers’ abilities to enforce reasonable noncompetition agreements, nonsolicitation agreements, and non-disclosure agreements in many circumstances. Under the tersely-worded bill, any unemployed individual found to be eligible to receive unemployment benefits pursuant to the unemployment compensation law “shall not be bound by any covenant, contract, or agreement, entered into with the individual’s most recent employer, not to compete, not to disclose, or not to solicit.” 

Although unclear, it appears that this law would allow employers to enforce such agreements only in circumstances where an employee resigns, or is discharged for severe or gross misconduct. In cases of termination for simple misconduct (eligible for unemployment following a seven-week disqualification), or termination unrelated to misconduct, such agreements would appear to be unenforceable. The bill also would grandfather any agreements in effect before the date of enactment. 

Note: This article was published in the September 2013 issue of the New Jersey eAuthority.

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