The Court of Appeals recently addressed the enforcability of a provision in a New Jersey ADP restrictive covenant. The provision prohibits ADP’s former employees from soliciting, diverting or accepting business from any prospective client. The Appellate Division found that the RCA was too broad and failed to meet the requirements of the statute. It remanded the six cases for further consideration.
Important For Employers Wishing To Enforce Such Agreements
Although New Jersey courts have not consistently rejected restrictive covenants against terminated employees, the scope of the covenant must be reasonable. Restrictive covenants that require a two-year period of restraint are generally enforced. However, a two-year time period may be insufficient to protect legitimate business interests.
The Court also upheld a provision that permits ADP to recover legal costs to defend against claims against it. While ADP conceded that the provision was overbroad, it sought to enforce the version that only applied to prospective clients the Defendants knew about while working for ADP.
In order to enforce a restrictive covenant, the court must balance the employer’s need for protection against the burden on the employee. The Third Circuit held that a restrictive covenant is only valid if it doesn’t cause irreparable harm. In this case, ADP failed to demonstrate that enforcing the clause would cause irreparable harm to the employee.
The Appellate Division of New Jersey is now attempting to provide consistency in the analysis of the enforceability of restrictive covenants in the employment context. The decision is important for employers wishing to enforce such agreements. The ruling will impact how employers protect their business interests and minimize their liability for violating the terms of the agreements. Read more – scura.com…
