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Is Non Compete Agreement about joining Client's Client Binding?

Morristown, NJ |

I work for a Company A in NJ which contracted to Vendor B and which in turn to Client C.
Company A-->Vendor B-->Client C.
Now, the non compete agreement says I cannot work for Client's Client for one year. Is this valid because Company A's clients will have clients pretty much everywhere in US? Is it not severe restriction.

If I get terminated from Client C contract and rejoin them after 2 months on a new contract through Vendor D--->Client C. Will there be any legal issues since the previous contract got terminated?

Attorney Answers 3


Generally, agreements not to solicit certain clients for one year after employment termination are enforceable in New Jersey. However, more information is needed before a determination can be made regarding whether the agreement you describe is enforceable. You may wish to retain an attorney to review the agreement and your situation in detail.

The information provided above is for general purposes only. It does not constitute legal advice or create an attorney-client relationship. Seek competent legal representation, because the facts of each case are different.

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The Blue Pencil Doctrine

“Blue penciling” occurs when a court decides not to enforce certain sections of a non-competition agreement that it considers too broad, but still enforces the rest of the agreement. Instead of declining to enforce the entire agreement altogether or rewriting unenforceable provisions, the court will literally cross out gramatically severable, unreasonable provisions but keep the rest of the agreement intact “It’s illegal to prevent someone from getting a job.” Yes, but getting a job where? A non-compete agreement that is reasonable in time and distance is enforceable. So, what’s “reasonable” you ask?

It depends on the employer’s geographic customer base. Let’s say that you sell shoes in St. Charles, Jefferson and St. Louis counties. Could you enforce a non-compete in those counties for the sale of shoes, i.e. prevent your former salesman from being employed as a shoe salesman in those counties? Yes, absolutely. Does it prevent your former salesmen from getting a shoe sales job outside of those three counties ... no. Protecting your customer base in those counties is not preventing your former employee from gainful employment in the rest of Missouri and 49 other states …. and that’s reasonable under the law of non-competition.If you want to know the effect of a noncompete clause, you need to see a lawyer. The differences between one state's laws and another's can significantly affect the answer. And which state's law applies is a separate issue entirely, one that must be addressed in multi-state arrangements.

The particular facts of your case may help you or hurt you, and even minor variations in your employment arrangement can affect the legal situation.
In this article, we examine some of the issues employees should be aware of when trying to get out of a noncompete contract. Next week, we'll take the employer’s perspective. If you’re a manager, what do you need to consider if you want your staff members to sign a noncompete?
Confidential information is protected
First, you have to look at what, exactly, is being limited by your contract. The scope of prohibited work is what’s important. That description may mean the difference between whether your noncompete will be upheld by the courts or thrown out.

If the noncompete contract discusses prohibited trade secrets or confidential business information, perhaps you can work in a related area as long as those items are not compromised.

Knowledge about existing customers might be the key. You may have agreed not to solicit or go to work for current customers of the company.

The more closely the scope protects special, proprietary aspects of your employer's business, the more likely it will be that you can’t get out of it. Even in states with laws that disfavor noncompete agreements, the courts will more likely uphold the agreement if it’s written in a narrow way to protect proprietary information.

However, if the scope of the prohibited work is too great or too ambiguous, courts sometimes will view that noncompete as unreasonable. A ruling may find that a broadly written contract is against the public interest of competition in the marketplace or that it's in excess of legally permitted limits.Here’s where it gets tricky: What is a “reasonable” restriction? Most of these agreements broadly restrict “practice of chiropractic.” In regard to time period, in most cases, two years or less would be considered a “reasonable” time to prohibit you from practicing.

The distance restriction is more problematic, since it depends on the area. In an area that has a lot of people, such as a suburb, the area of restriction might be no more than five miles. In a rural area, the restriction might be as much as 25 miles.

Non-compete agreements are written based on the concept of “restraint of trade.” If the non-compete unreasonably restricts the former employee’s ability to practice (that’s restraint of trade), it isn’t going to be upheld.

The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between Howard Roitman, Esq. and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

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It is nearly impossible to answer this question without reviewing the non compete and discussing the facts with the client. Even though you are arguing that CLIENT C is not an intended party, I would not be able to come to that conclusion without reviewing the agreement.

In these types of matters, I would also attack it from the point of where your employer did not meet all the provisions of the contract and attempt to make his provision unenforceable. Whether it works or not, it shows a desire on your part to attack rather than sit back.

Good luck!

Herbert Tan, Esq.

The National Newark Building
744 Broad Street, 16th Fl.
Newark, New Jersey 07102
(973) 735-2681 (W)
(973) 735-2682 (F)

Manhattan Office
305 Broadway, 14th Floor
New York, New York 10007
(888) TAN-LAWS

Member of National Employment Lawyers Association (NELA)

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