Prohibits non-compete clauses.

A1829

ASSEMBLY, No. 1829

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblyman ANTHONY S. VERRELLI

District 15 (Hunterdon and Mercer)

Assemblywoman� VERLINA REYNOLDS-JACKSON

District 15 (Hunterdon and Mercer)

Assemblywoman� KATIE BRENNAN

District 32 (Hudson)

SYNOPSIS

���� Prohibits non-compete clauses.

CURRENT VERSION OF TEXT

���� Introduced Pending Technical Review by Legislative
Counsel.

��

An Act

prohibiting non-compete clauses and
supplementing Title 34 of the Revised Statutes.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.��� As used in this act:

���� �Business entity� means a
private business, including, but not limited to, an individual proprietorship,
partnership, corporation, association, limited liability company, joint
venture, firm, company or other legal entity, or a division or subsidiary of the
business entity.

���� �Employer� means a business
entity or other employer that employs one or more workers, or has one or more
workers working for the employer by providing a service to or on behalf of the
employer, including a charitable organization, a public corporation, and the
State and its instrumentalities and political subdivisions.

���� �Fringe benefit� means any
vacation leave, sick leave, medical insurance plan, disability or life
insurance plan, pension benefit plan, or any other benefit of economic value,
to the extent that the leave, plan, or benefit is paid for in whole or in part
by the employer.

���� �Misconduct� means conduct
which is improper, intentional, connected with the individual�s work, within
the individual�s control, not a good faith error of judgment or discretion, and
is either a deliberate refusal, without good cause, to comply with the lawful
and reasonable employer rules made known to the worker, or a deliberate
disregard of standards of behavior the employer has a reasonable right to
expect, including reasonable safety standards and reasonable standards for a
workplace free of drug and substance abuse.

���� �Non-compete clause� means any
agreement arising out of an existing or anticipated employment relationship
between an employer and a worker, including an agreement regarding severance
pay, to establish a term or condition of employment that prohibits the worker
from, penalizes a worker for, or functions to prevent or hinder in any way, the
worker from seeking or accepting work with a different employer after the
employment relationship ends, or operating a business after the employment
relationship ends.� For the purposes of this act �agreement� includes, but is
not limited to, a contractual term or workplace policy, whether written or
oral.

���� �No-poach agreement� means any
agreement between employers or between an employer acting as a contractor and
any legal person acting as a contractee that restricts or hinders the ability
of an employer to hire, or contract for the services of, a worker, or hinders a
worker from obtaining employment.

���� �Officer� means a president,
vice president, secretary, treasurer, principal financial officer, comptroller,
principal accounting officer, or any individual routinely performing
corresponding functions with respect to a business entity whether incorporated
or unincorporated.

���� �Pay� means hourly wages or
periodic salary, including tips, regularly paid and nondiscretionary
commissions and bonuses, and regularly paid overtime. �Pay� shall not mean
fringe benefits.

���� �Policy-making authority�
means final authority to make policy decisions that control significant aspects
of a business entity or common enterprise of which the entity participates.

���� �Policy-making position� means
a business entity's president, chief executive officer or the equivalent, any
other officer of a business entity who has policy-making authority, or any
other individual who has policy-making authority for the business entity
similar to an officer with policy-making authority.� An officer of a subsidiary
or affiliate of a business entity that is part of a common enterprise who has
policy-making authority for the common enterprise may be deemed to have a
policy-making position for purposes of this paragraph.

���� �Senior executive� means a
worker who is in a policy-making position with an employer and is paid total
compensation of not less than $151,164 during the year immediately preceding
the end of employment, or not less than $151,164 when annualized if the worker
was employed during only part of the preceding year.� Total compensation
includes salary, commissions, nondiscretionary bonuses and other
nondiscretionary compensation, but does not include board, lodging and other
facilities, or other fringe benefits.

���� �Trade secrets� has the
meaning given in section 2 of the �New Jersey Trade Secrets Act,� P.L.2011,
c.161 (C.56:15-2).

���� �Worker� means an individual
who works, or previously worked, for an employer by providing a service to, or
on behalf of, the employer, whether the worker is paid or unpaid, without
regard to the worker's title or the worker's status under any other State or
federal law, including, but not limited to, a worker who works in a
supervisory, managerial, or confidential position, a worker who works as an
employee, independent contractor, extern, intern, volunteer, apprentice, or
sole proprietor, or a worker who works for a franchisee or franchisor, but not
including a franchisee in the context of a franchisee-franchisor relationship.

���� 2.��� a.� With respect to a
worker who is not a senior executive, an employer shall not: seek, require,
demand, or accept a non-compete clause from the worker after the effective date
of this act; enforce or attempt to enforce a non-compete clause, including a
non-compete clause entered into before the effective date of this act; or
represent that the worker is subject to a non-compete clause.

���� b.��� With respect to a worker
who is a senior executive, an employer shall not: seek, require, demand, or
accept a non-compete clause from a worker after the effective date of this act;
enforce or attempt to enforce a non-compete clause entered into after the
effective date of this act; or represent that the worker is subject to a
non-compete clause entered into after the effective date of this act.

���� 3.��� For any non-compete
clause that is in effect upon the enactment of this act other than a
non-compete clause with a senior executive, the employer shall provide a clear
and conspicuous notice to the worker not more than 30 business days after the
effective date of this act that the non-compete clause will not be, and cannot
legally be, enforced against the worker.� The notice shall identify the
employer and be on paper delivered by hand to the worker, or by mail at the
worker's last known personal street address, or by email at an email address of
the worker, including the worker's work email address or last known personal
email address, or by text message at a worker�s mobile telephone number.� For
the purposes of this section, the following model language constitutes the
required notice to the worker that the worker's non-compete clause cannot
legally be enforced and will not be enforced against the worker:

���� �A State law, (P.L.����� ,
c.����� (C.����� )(now pending before the Legislature as this bill)), makes it
unlawful for us to enforce a non-compete clause.� As of (the date chosen by the
employer but not later than the effective date of P.L.����� , c.����� (C.�����
)(now pending before the Legislature as this bill)) we will not enforce any
non-compete clause against you.� This means that as of that date:

���� 1.��� You may seek or accept a
job with any company or any person---even if they compete with (employer name).

���� 2.��� You may run your own
business---even if it competes with (employer name).

���� 3.��� You may compete with
(employer name) following your employment with (employer name).

���� This law does not affect any
other terms or conditions of your employment, or diminish in any way rights you
have under other employment laws.�

���� In addition to providing the
notice required by this section in English, an employer is permitted to provide
the notice in a language (or in languages) other than English or to include
internet links to translations in additional languages.� The employer may use
any translation of the model language approved by the
Department
of Labor and Workforce Development
.

���� 4.��� In the case of a
non-complete clause between an employer and worker who is a senior executive
which was entered into prior to, and is in effect upon, the effective date of
this act, the non-compete clause shall be void and not enforceable unless it
meets the following requirements:

���� a.���� The employer shall
provide a disclosure of the terms of the non-compete clause in writing to the
worker not more than 30 business days after the effective date of this act
which includes a description of the requirements of this section and all
revisions made in the provisions of the non-compete clause necessary for
compliance with the requirements of this section.� If the non-compete clause is
revised pursuant to this subsection, the revised non-compete clause shall be
signed by the employer and the worker.� The disclosure shall expressly state
that the worker has the right to consult with counsel prior to signing.

���� b.��� The non-compete clause
shall not be broader than necessary to protect the legitimate business
interests of the employer, including the employer�s trade secrets or other
confidential information, including sales information, business strategies and
plans, customer information, and price information.� A non-compete clause may
be presumed necessary if the legitimate business interests cannot be adequately
protected through an alternative arrangement, including but not limited to: an
agreement not to solicit or hire employees of the employer; an agreement not to
solicit or transact business with customers, clients, referral sources, or
vendors of the employer; or a nondisclosure or confidentiality agreement.

���� c.���� The period in which the
non-compete clause restricts the worker�s engaging in activities competitive
with the worker�s former employer does not to exceed 12 months following the date
of termination of employment.

���� d.��� The non-compete clause
shall be reasonable in geographical reach and limited to the geographic areas
in which the worker provided services or had a material presence or influence
during the two years preceding the date of termination of employment, and shall
not prohibit the worker from seeking employment in other states.

���� e.���� The non-compete clause
shall be reasonable in the scope of proscribed activities in relation to the
interests protected and limited to only the specific types of services provided
by the worker at any time during the last two years of employment.

���� f.���� The non-compete clause
shall not penalize a worker for defending against or challenging the validity
or enforceability of the non-compete clause.

���� g.��� The non-compete clause
shall not contain a choice of law provision that would have the effect of
avoiding the requirements of this section, if the worker is, and has been for
at least 30 days immediately preceding the worker�s termination of employment, a
resident of or employed in the State.

���� h.��� The non-compete clause
shall not waive the worker�s substantive, procedural and remedial rights
provided under this act, any other act or administrative regulation, or under
the common law.

���� i.���� The non-compete clause
shall not restrict a worker from providing a service to a customer or client of
the employer, if the worker does not initiate or solicit the customer or
client.

���� j.������ The non-compete
clause shall not be unduly burdensome on the worker, injurious to the public,
or inconsistent with public policy.

���� k.��� The non-compete clause
provides it shall be void if the employer does not provide written notice to
the worker of the employer�s intent to enforce the non-compete clause within 10
days after the termination of an employment relationship between the employer
and the worker.� This subsection shall not apply if the worker has been
terminated for misconduct.

���� l.���� The non-compete clause
provides that during any period after the employment relationship ends in which
the worker is prevented from engaging in work or taking employment because of
restrictions imposed by the non-compete clause, the employer, unless the worker
is terminated for misconduct or there is a breach by the worker, shall pay
the worker an amount equal to 100 percent of the pay to
which the worker would be entitled for the work during that period; and make
any benefit contributions needed to maintain the fringe benefits to which the
worker would be entitled during that period.

���� 5.��� The requirements of this
act shall not apply:

���� a.���� To a non-compete clause
that is entered into by an employer pursuant to a bona fide sale of a business
entity, of the employer's ownership interest in a business entity, or of all or
substantially all of a business entity's operating assets; or

���� b.��� Where a cause of action
related to a non-compete clause accrued prior to the effective date.

���� 6.��� No-poach agreements are
hereby declared to be contrary to public policy and any no-poach agreement
shall be void.

���� 7.��� A worker subject to, or
affected by, a non-compete clause or no-poach agreement prohibited by this act
may bring a civil action in a court of competent jurisdiction against any
employer alleged to have violated this act.�
A worker
may bring the action within two years of the later of:

���� a.���� When
a prohibited
non-compete clause or a no-poach agreement
was signed or entered into;

���� b.��� When
the worker learns of the prohibited
non-compete clause or a no-poach
agreement
;

���� c.���� When
the employment relationship is terminated; or

���� d.��� When
the employer takes any step to enforce the
non-compete clause or a
no-poach agreement
.

���� The
court shall have jurisdiction to void any agreement and to order all
appropriate relief, including: enjoining the conduct of the employer; ordering
payment of liquidated damages; and awarding lost compensation, damages,
reasonable attorneys� fees and costs.� For the purposes of this section,
liquidated damages shall be calculated as an amount not more than $10,000.

���� 8.��� Every
employer shall post a copy of this act or a summary approved by the Department
of Labor and Workforce Development in a prominent place in the work area.� An
employer who fails to post a copy of this act or a summary of this act, or
provide the notice to workers required by section 3 of this act that previous
non-compete clauses are no longer valid and enforceable, or provide a notice to
workers required by section 4 of this act concerning non-compete clauses for
senior executives, shall be issued by the department a written warning for the
first violation, and shall be fined up to $250 for a second violation and up to
$1,000 for the third and each subsequent violation. A penalty imposed by the
department pursuant to this section shall be collected and enforced by summary
proceedings pursuant to the provisions of the �Penalty Enforcement Law of
1999,� P.L.1999, c.274 (C.2A:58-10 et seq.).

���� 9.��� This act shall take
effect immediately.

STATEMENT

���� This bill prohibits
non-compete clauses, with certain exceptions, and prohibits no-poach
agreements.

���� The bill provides that no
private, public, or nonprofit employer may seek, require, demand, or accept a
non-compete agreement from any employee or other individual who provides
services for, on behalf of the employer, whether the individual is paid or unpaid,
including an independent contractor, extern, intern, volunteer, apprentice, or
sole proprietor.� A non-compete clause is defined by the bill as any agreement
between an employer and a covered individual that prohibits or restricts that
covered individual from obtaining employment after the conclusion of employment
with the employer included as a party to the agreement.

���� The bill provides that every
contract by which anyone is restrained from engaging in a lawful profession,
trade, or business of any kind is to that extent void.� Regarding non-compete
clauses in effect when the bill goes into effect, the bill requires that
employer to notify the affected employees that those non-compete clauses are no
longer valid and not enforceable.

���� The bill provides the
following exceptions to the prohibition on non-compete clauses:

���� 1.��� When a cause of action
related to a non-compete clause accrued prior to the effective date of the
bill;

���� 2.��� Non-compete clauses
entered into by an employer pursuant to a bona fide sale of a business entity
or its operating assets, or of the employer's ownership interest in a business
entity; or

���� 3.��� Non-compete clauses
between employers and senior executives which were entered into prior to the
effective date of the bill will remain valid if they meet certain requirements
specified by the bill, or are modified to meet the requirements.

���� The bill�s requirements for
existing non-compete clause for senior executives include:

���� 1.��� That the non-compete
clause is not broader than necessary to protect legitimate interests of the
employer, including trade secrets and other confidentiality issues;

���� 2.��� That the period in which
employment for a worker is restricted not be longer than 12 months;

���� 3.��� That there be no
retaliation against a worker for defending rights provided by the bill and no
waiver of the worker�s rights provided by the bill or other law;

���� 4.��� That the non-complete
clause is related to the work actually done by the worker and the geographic
area where the work was done.

���� The bill also prohibits
employers from entering no-poach agreements to not hire each other�s employees
or former employees.

���� A covered individual may bring
a civil action in a court of competent jurisdiction against any employer or
person alleged to have violated the provisions of the bill.� The court has
jurisdiction to void any non-compete clause or no-poach agreement and to order
appropriate relief.� The bill also authorizes the Department of Labor and
Workforce Development to impose penalties on employers for failing to provide
the notifications to employees required by the bill.