A pair of bills were introduced in the New Jersey Legislature seeking to ban or significantly restrict employers’ ability to enter into and enforce noncompete agreements. The proposed legislation (S4385 and S4386) seeks to place New Jersey among the states that have banned or dramatically restricted the enforcement of such agreements, including California, Colorado, Oklahoma, North Dakota and Minnesota. The bills follow the Federal Trade Commission’s stalled attempt to restrict noncompete agreements nationwide under the Biden Administration (discussed here). Employers should keep apprised of New Jersey’s ongoing efforts to restrict noncompetes and ensure their current agreements are reasonable in scope and duration, as well as narrowly tailored to protect legitimate business interests, and otherwise in compliance with current New Jersey law.Should S4385 be enacted, employers will need to take the necessary steps to ensure that noncomplete clauses entered into with senior executives are revised to be compliant with the act. If either bill is enacted, employers will need to be prepared to notify workers and employees of the unenforceability of their noncomplete clauses within 30 days.

What employers can do

The passage of either introduced bill would completely or significantly restrict employers from enforcing or entering into noncomplete agreements. As such, employers will need to ensure they take sufficient measures to protect their legitimate business interests and confidential information. Employers should implement precautions and protective measures to ensure that their confidential and trade secret information is entitled to protection.

Such measures include, but are not limited to:

  • Entering into confidentiality and/or nondisclosure agreements with employees.
  • Restricting or limiting access to information internally on an as needed basis.
  • Password-protecting computer systems and databases.
  • Keeping confidential information stored in safe and secure location and other measures to proactively safeguard confidential or proprietary information.
  • Using narrowly tailored nonsolicitation agreements to protect business interests.

New Jersey Senate Bill No. 4385

On May 19, 2025, Senate Bill S4385 was introduced in the New Jersey Legislature for the stated purpose of prohibiting noncompete clauses (the bill).[1] The bill would prohibit employers from entering into, seeking to enforce, or representing to a worker that they are subject to any noncompete clause entered into prior to, or after, the effective date of the act, with few exceptions.

The bill defines a “noncompete clause” as:

  • 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.

Notably, the potential impact on restrictive covenants other than noncompetes is unclear. For example, an argument can be made that for certain occupations, such as sales, the prohibition on clauses that “hinder in any way” a worker’s ability to seek or accept work with a different employer may apply to nonsolicitation agreements that have the effect of hindering a worker’s ability to secure employment following their separation.

Upon the passage of the bill (if it is passed in its current form), employers would be required to provide workers with a clear and conspicuous notice within 30 days that any applicable noncompete clause will not be, and cannot be, legally enforced.

The proposed bill would allow for noncompetes to be enforced against certain senior executives in limited circumstances. “Senior Executives” are defined as workers in a “policy-making position” with “policy-making authority” (final authority to make policy decisions that control significant aspects of a business entity or common enterprise of which the entity participates), and who are paid total compensation of $151,164 per year or more. Thus, some high performing/earning employees who are not in policy making positions would be excluded from the senior executive exception. Further, the exception would only apply to noncompete clauses entered into with Senior Executives prior to the effective date of the act that meet a host of additional requirements, including, but not limited to, that the clause:

  • Not exceed 12 months.
  • Be limited to the geographic area where the worker provided services or had a material presence of influence in the preceding two years, and not prohibit the worker from seeking employment in other states.
  • Not penalize a worker for defending against or challenging the validity or enforceability of the noncompete clause [thus, likely prohibiting the provision of attorney fees to a prevailing employer].
  • Not contain a choice of law provision that would have the effect of avoiding the bill’s requirements, if the worker was a resident or employed in New Jersey in the 30 days’ preceding the termination of employment.
  • Not restrict a worker from providing services to a client or customer of the employer if the worker does not initiate or solicit the client or customer.
  • Provides that it shall be void if the employer does not provide written notice to the worker of the employer’s intent to enforce the noncompete clause within 10 days after the termination of an employment relationship between the employer and the worker. This does not apply if the worker was terminated for misconduct.
  • 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 noncompete 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% 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.

Moreover, employers would be required to provide a disclosure of the terms of the noncompete clause in writing to the Senior Executive not more than 30 business days after the effective date of the act, which includes a description of the requirements under the act and all revisions made in the provisions of the noncompete clause necessary for compliance. If the noncompete clause were to be revised pursuant to the bill’s provisions, the revised noncompete clause would need to be signed by the employer and the worker.

In addition to the limited Senior Executive exception, the requirements of the bill would not apply to a noncomplete clause entered into by an employer pursuant to the sale of (i) a business entity, (ii) the employer’s ownership interest in a business entity, or (iii) all or substantially all of a business entity’s operating assets.

Finally, the bill provides that no-poach agreements are declared to be contrary to public policy and void. No-poach agreements include 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.

A worker subject to a noncompete clause or no-poach agreement prohibited by the bill would have a right to bring a civil action. The bill provides courts with jurisdiction to void any agreement and order appropriate relief, including injunctive relief, liquidated damages (capped at $10,000), lost compensation, actual damages, and reasonable attorneys' fees and costs.

New Jersey Senate Bill No. 4386

On May 19, 2025, Senate Bill S4386 (bill #2) was also introduced in the New Jersey State Legislature. Like S4385, bill #2’s stated purpose is to prohibit noncompete clauses, no-poach agreements, and other restrictions on worker choice of employment. It is not clear whether this bill was introduced as a compliment to S4385 or as a potentially viable alternative. Although S4385 refers to “workers” and bill # 2 refers to “employees”, the term “employee” is broadly defined to include full-time or part-time employees, independent contractors, externs, interns, volunteers, apprentices, or sole proprietors who provide a service to an employer or to a client or customer of an employer on behalf of the employer, and individuals who provide services through a business or nonprofit entity or association. Thus, bill #2 is not limited to only traditional “employees”.

Bill #2 declares any noncomplete clause that restrains an employee from engaging in a lawful profession, trade, or business of any kind after the conclusion of the employee’s employment with the employer, as against public policy, void, and unenforceable. Bill #2 applies retroactively to any noncompete clause or agreement entered into on or before the bills effective date. Further, bill #2 makes it unlawful for an employer to enter into, attempt to enter into, present to an employee, past employee, or prospective employee as a term of employment, or attempt to enforce, or represent that the employee is subject to, any contract that restrains an employee from engaging in a lawful profession, trade, or business of any kind after the conclusion of the employee’s employment with the employer.

In addition to the ban on noncompete clauses, bill #2 seeks to bar employers from recouping employment-related costs from separated employees, such as the cost of training. The bill prohibits employers from entering into contracts with employees that impose any penalty, fee, or cost on an employee for terminating the relationship such as a replacement hiring fee, retraining fee, reimbursement for immigration or visa related costs, liquidated damages, or lost good will and profit.

Moreover, bill #2 requires employers to notify all current employees within 30 days of the effective date that any noncompete clause or agreement that restrains an employee from engaging in a lawful profession, trade, or business of any kind, or which violates the act, is against public policy, void and unenforceable. Even more onerous, bill #2 also requires that employers notify past employees with whom the employer has contact that any noncompete clause entered into is void and unenforceable.

Similar to S4385, bill #2 declares no-poach agreements to be contrary to public policy and any no-poach agreement, including no-poach agreements entered into or in effect on or before the effective date of this act, void and unenforceable.

Bill #2 provides that employees subject to a noncompete clause or no-poach agreement may bring a civil action on their behalf, on behalf of other persons similarly situated, or both. The permissible relief sought includes injunctive relief, liquidated damages, lost compensation, actual damages, punitive damages of not more than $5,000 per employee, and reasonable attorneys’ fees and costs. Alternatively, employees would be permitted to submit claims to the Attorney General or the Commission of Labor and Workforce Development.

Status of bills

Both bills are currently pending before the Senate Labor Committee. Although the likelihood of their ultimate passage is unclear, employers should be mindful of the pending legislation and the continued efforts of some New Jersey State legislators to ban and/or significantly restrict noncompete agreements. Further, employers should review their existing noncompete agreements to ensure compliance with current New Jersey law.

[1] On May 22, 2025, an identical bill was introduced in the New Jersey State Assembly as A5708.

For more information, please contact Kenneth A. Rosenberg at krosenberg@foxrothschild.com or 973-994-7510, Brian J. Frederick at bfrederick@foxrothschild.com or 973-548-3398, or another member of Fox Rothschild’s national Labor & Employment Department.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the author(s) and not necessarily this law firm or its clients. Prior results do not guarantee a similar outcome.