There are generally four types of restrictive covenants in New Jersey:

  1. Non-Compete. Prevents an employee from entering into direct or indirect competition with their former employer for a specific period of time.
  2. Non-Solicitation of Customers. Prohibits an employee from soliciting and/or doing business with their former employer’s customers for a specified period of time.
  3. Non-Solicitation of Employees. Prohibits an employee from soliciting and/or hiring their former employer’s employees for a specified period of time.
  4. Non-Disclosure of Confidential Information. Prohibits an employee from using or disclosing their former employer’s confidential and proprietary information

The enforceability of any restrictive covenant depends on its reasonableness under “all the circumstances of the case.” In New Jersey, courts will consider the following factors in deciding whether to enforce a restrictive covenant:

  1. The covenant must be no more restrictive than is necessary to protect the legitimate interests of the former employer.Examples of legitimate interests include: (a) trade secrets and confidential business information of the former employer, e.g., pricing information, customer buying habits, sales projections, marketing strategies; (b) customer relationships; and (c) confidential customer lists.A former employer generally has no protectable interest in merely stifling ordinary competition, or in preventing an employee from using general skills in the industry which have been built up over the employee’s career. In addition, matters that are generally known within the industry and trivial differences between how companies do business are not protectable interests.With respect to customer non-solicitation causes, an employer generally has no protectable interest in preventing a former employee who brought his/her relationships within the industry to his/her employment, from using those industry contacts, except in certain situations, e.g., interfering with successful contracts which the employee negotiated on the part of the former employer and/or current outstanding bids of the former employer in which the former employee participated.
  2. The covenant must not impose an undue hardship on the employee. In determining whether the hardship is undue, courts will consider the nature of the profession; the duration and geographic scope of the restrictive covenant; whether the types of activities restrained are those which would place the employee in actual competition with the former employer; whether the covenant will unduly burden the employee in finding work in his or her field; the reason for the termination of the employment relationship, i.e., whether the employee voluntarily resigned or was terminated; and whether severance is being paid during the restrictive covenant period.
  3. The covenant must not be injurious to the public interest. Restrictive covenants are unenforceable against attorneys and licensed psychologists in New Jersey.

Restrictive covenants that fail this test may still be enforced to the extent reasonable under the circumstances. Courts in New Jersey have broad power to grant partial enforcement of a restrictive covenant both by removing offensive terms and by adding limiting language in order to grant an employer only that protection which it deems necessary to protect legitimate interests.