What is a noncompete agreement and how does it relate to unfair competition law?

A non-compete agreement is a type of contract that prohibits a person from engaging in the same type of business or profession in the same geographic area for a given period of time as a former employer. This is done to protect a certain business’s competitive advantage in the market. In New Jersey, non-compete agreements are governed by The Restraint of Trade Act, which is part of the state’s unfair competition law. Under this act, non-compete agreements must be reasonable in order to be enforceable. A non-compete agreement is considered reasonable if it does not impose an undue hardship on the employee, and is necessary to protect the employer’s legitimate business interests. Factors used to determine the reasonableness of a non-compete agreement include the geographic scope, duration, and the type of activities prohibited by the non-compete agreement. In addition to having to be reasonable, non-compete agreements must also be supported by “adequate consideration” for the employee. This usually refers to a new or additional benefit or payment to the employee in exchange for signing the agreement. To sum up, a non-compete agreement is a legally binding contract between an employer and employee that places restrictions on the employee’s ability to engage in the same type of business or profession as their former employer, for a certain period of time. Non-compete agreements have to be reasonable and supported by adequate consideration in order to be enforceable under New Jersey’s unfair competition law.

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What is a noncompete agreement and how does it relate to unfair competition law?

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