Treasury Recommends Reform to Non-Compete Agreements (Part 2)

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Non-Competition and Non-Compete Attorney

In our last article, we considered the benefits and the negative side effects non-compete agreements have on our workforce.  While they would help to promote innovation by keeping employees in-house, which lead to companies investing more in training their employees, they have been shown to reduce the wages of employees who sign those agreements, stymie wage growth, and decrease job mobility.  Employers often take advantage of these agreements by sticking them into long contracts that the common individual will not read or understand.  There are fast-food employers and personal service providers that even put these non-compete agreements into their contracts, which makes no sense because often these employees do not possess any trade secrets that require the employer to insert a non-compete agreement into the employee’s employment contract.

So what do these authors recommend as some policies that could be adopted?  One of the first things is to create transparency laws, requiring employers to tell their employees when they are entering into a non-compete agreement prior to being hired.  Another proposal is to limit these types of agreements to companies looking to protect trade secrets and not for companies simply trying to prevent a menial worker from being able to go and work for the competition if he or she is moving or gets laid off for some reason.  One final proposal is to require those who enter into those agreements to receive some form of consideration, or compensation, for entering into this type of agreement.  The authors recommended severance packages as a type of consideration.

In the end, these proposals may get adopted or may not.  But if you are looking for employment, this is just yet another reminder on how important it is to read the agreement that you are acknowledging, and think through the ramifications.  The consequences could be dire and affect your future if you do not.

To discuss your NJ Non-Competition and Non-Compete 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.