Is it Legal to Have Employees Sign a Contract that Says They Can’t Leave the Company until a Certain Date?

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Business Contract Attorney

Yes. It is acceptable to have an employment contract in the US that requires people to stay for a certain date. However, there are limitations.

First, normally such contracts will have a certain time period, a certain salary, and certain benefits. Such contracts tend to spell out all sorts of things. Including how each party can end the agreement. An employee at our firm was told by her old company, they wanted to hire a person with a contract. They simply paid the penalty to buy her out of her old contract so she could come to work for them instead.

Second, the contract has to be reasonable in length. As one contractor wrote, we have laws against involuntary servitude. A contract that is too long isn’t going to work. Nor is a contract which is too heavily favored on the side of the employer and gives the employee nothing in return likely to be enforced. The fact the employer provided employment may be enough. But when contracts are reviewed, especially in cases where you have a party who is unsophisticated on one side, judges might look askance to contracts that are too heavily weighted towards the employer.

Third, the employee can still leave. The employer cannot literally force the employee to stay. There can be penalties on both sides for a breach. For example, if the employer paid for the employee to go to college, and in return requires the employee to stay for 5 years, the employer can certainly require that he be paid for that investment, or for a portion of it.

Yes, an employment agreement may state that an employee must remain employed by the company through a given date. Please note however that:

  • The date must represent a reasonable duration for the employment period (e.g., I expect that no court would enforce a 50-year employment term).
  • Because of the 13th Amendment’s prohibition against involuntary servitude, the employee cannot be forced to remain with the employer if the employee insists on leaving.
  • However, if the employee does breach the employment agreement by leaving before the employment term ends, the employer must be able to recover amounts that the employer loses as a result of the early departure (for example, if a higher-cost replacement employee is hired, the amount of the additional costs incurred for the new employee through the remainder of the employment term).

To discuss your NJ Employment and/or Business Contract matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.