In addition to federal and state‑specific hurdles facing employers who wish to utilize non‑compete agreements, the Appellate Division of the New Jersey Superior Court has provided a warning to employers across the country that those agreements can be stricken for seemingly unrelated employment issues.
On September 22, 2017, in the case of SpaceAge Consulting Corp. v. Maria Vizconde et al. (case no. A-3444-15T1), the Superior Court of New Jersey, Appellate Division, held that an employer had no ability to prevent its former employee from working for its direct client despite the existence of a non‑compete agreement expressly covering that client. The Court noted that the employee was not paid properly by the employer during her training period and thus found that because the employment and non‑compete “agreements violated federal law, they were void and unenforceable.” Id. at *12.
This case should serve as a reminder to employers everywhere that their employment and non‑compete agreements may be voided by a court if they are unconscionable, or in other words if they are unfairly one‑sided or otherwise violate the law. At times, seemingly commonplace or minor terms are used to render an entire agreement unenforceable. This ruling stresses the importance of having proprietary and restrictive covenant agreements reviewed by an attorney specializing not only in the structuring of the restrictive covenants, but also in employment law. Indeed, competent attorney review is crucial any time employees are asked to sign any agreement that could have material impact on the business and/or the employee.
A copy of the SpaceAge Consulting Corp. opinion can be found on the Court’s website here.