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New Jersey A3970 – Eliminating Non-Competition Agreements

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Three members of the New Jersey Assembly have introduced A3970.  This would all but eliminate non-competition agreements.  #Businessinsurance  Their intention is to minimize unemployment.

What’s the problem?  For many small businesses, intellectual property is their most valuable property.  Without the ability to defend customer lists and proprietary processes, they don’t have a business.

Perversely, the bill gives small employers the incentive to fight as hard as possible to keep terminated employees from receiving unemployment since unemployment benefits are what triggers destruction of non-competition agreements.

For an intelligent discussion of this bill, try Ken Drossman’s analysis:  http://blog.oakandapplepartners.com/2013/04/26/republican-head-democratic-heart-and-bad-law/

A copy of the text of the bill appears below.

A3970 P.BARNES, III, EGAN
2
1 AN ACT concerning certain employment contracts and
2 unemployment compensation, and supplementing chapter 21 of
3 Title 43 of the Revised Statutes.
4
5 BE IT ENACTED by the Senate and General Assembly of the State
6 of New Jersey:
7
8 1. An unemployed individual found to be eligible to receive
9 benefits pursuant to the “unemployment compensation law,”
10 R.S.43:21-1 et seq., shall not be bound by any covenant, contract,
11 or agreement, entered into with the individual’s most recent
12 employer, not to compete, not to disclose, or not to solicit. This
13 section shall not be construed to apply to any covenant, contract, or
14 agreement in effect on or before the date of enactment of P.L. ,
15 c. (C. )(pending before the Legislature as this bill).
16
17 2. This act shall take effect immediately.
18
19
20 STATEMENT
21
22 This bill will invalidate any covenant, contract, or agreement not
23 to compete, not to disclose, or not to solicit, entered into by an
24 individual with the individual’s most recent employer, if the
25 individual is found to be eligible for unemployment insurance
26 benefits pursuant to the “unemployment compensation law,”
27 N.J.S.A.43:21-1 et seq. The bill stipulates that the provisions of the
28 bill will not apply to any covenant, contract, or agreement in effect
29 on or before the date of the bill’s enactment.

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