Restrictive covenants in employment agreements can follow workers for years after they leave a job, limiting where they can work, what clients they can contact, and what information they can share. Whether you are an employer trying to protect your business or an employee trying to understand what you signed, the legal landscape around these agreements has shifted significantly in recent years and continues to evolve.
The labor and employment attorneys at Mandelbaum Barrett PC advise both employers and employees on restrictive covenant agreements throughout New Jersey and New York. Here is what you need to know about how these agreements work and how courts evaluate their enforceability.
What Counts as a Restrictive Covenant
The term “restrictive covenant” covers several distinct types of post-employment restrictions. The most common are non-compete agreements, which prevent an employee from working for a competitor or starting a competing business for a defined period after leaving. Non-solicitation agreements restrict contact with former clients or customers. Non-recruitment agreements prohibit recruiting former colleagues. Confidentiality and non-disclosure agreements protect proprietary information and trade secrets.
Each type of agreement functions differently, has different enforcement standards, and is evaluated by courts using different criteria. A document labeled a “non-compete” may actually include several types of restrictions with varying enforceability.
Enforceability Standards in New Jersey and New York
Courts in New Jersey and New York evaluate the enforceability of restrictive covenants under a reasonableness standard. An agreement that is reasonable in scope, duration, and geographic reach is more likely to be enforced. One that imposes restrictions broader than necessary to protect a legitimate business interest is more likely to be reduced or struck down entirely.
According to the Federal Trade Commission, there has been significant federal regulatory activity around non-compete agreements, reflecting growing concern about their impact on worker mobility. State-level enforcement standards remain in effect, and the interaction between federal regulatory developments and state law continues to evolve.
What Courts Consider Legitimate Business Interests
To enforce a restrictive covenant, an employer must typically show a legitimate protectable business interest. Courts recognize several categories of interests that may justify post-employment restrictions:
- Trade secrets and proprietary business information
- Confidential client and customer relationships built at the employer’s expense
- Specialized training provided to the employee
- Goodwill associated with the employer’s business
Not every employment relationship involves these interests. A court may refuse to enforce a non-compete in a role where the employee had no meaningful access to trade secrets, client relationships, or specialized training that would provide an unfair advantage if taken to a competitor.
What Employees Should Know Before Signing
Restrictive covenants are often presented to employees at the time of hiring or as part of a broader agreement. The fact that an agreement was signed does not mean it will be fully enforced, but it does create risk that a departing employee should take seriously. Before accepting a new position or resigning, consulting with an employment attorney can clarify what the agreement actually restricts and how likely it is to be enforced in a given jurisdiction.
Employers may also attempt to enforce agreements through temporary restraining orders and preliminary injunctions, which can freeze a former employee’s ability to work in their field while litigation proceeds. The practical consequences of this kind of enforcement action are significant regardless of the ultimate outcome on the merits.
Considerations for Employers Drafting Agreements
Employers who want enforceable restrictive covenants should draft them carefully and with current law in mind. Agreements that were enforceable under prior legal standards may face challenges under updated state law or federal regulatory developments. Periodic review of standard employment agreement templates is a sound business practice, particularly for companies in industries where employee mobility is common or where client relationships are a core asset.
Contact Mandelbaum Barrett PC for Restrictive Covenant Guidance
Whether you are drafting an employment agreement, responding to an enforcement action, or advising a departing employee, the labor and employment team at Mandelbaum Barrett PC can help. Our attorneys advise clients on both sides of restrictive covenant disputes throughout New Jersey and New York.
Reach out through our contact page to speak with our employment law team. We are here to help you assess your rights and options in connection with post-employment restrictions.