Thank You For Submiting Feedback!
Noncompetitive agreements have a proper place and are enforceable under appropriate circumstances. Thus a seller's incidental noncompetitive covenant, which is designed to protect the good will of the business for the buyer, is freely enforceable in the courts. And while a covenant by an employee not to compete after the termination of his employment is not, because of the countervailing policy considerations, as freely enforceable, it will nonetheless be given effect if it is reasonable in view of all the circumstances of the particular case. It will generally be found to be reasonable where it simply protects the legitimate interests of the employer, imposes no undue hardship on the employee, and is not injurious to the public.
The employers filed an action against the employee and sought an injunction to prevent the employee from breaching noncompetition provisions in an employment contract. The noncompetitive agreement provides that that on the termination of the employee’s employment, for any reason whatsoever, he will not for one year thereafter engage, either directly or indirectly, without the prior consent in writing of the Board of Directors of the employer, in promoting or selling equipment, products, appliances or systems similar to or competitive with any of those represented by the employers nor will he within said year divert or attempt to divert from the employer or any business represented by it any business whatsoever, particularly by influencing or attempting to influence any of the customers with whom he may have had dealings in connection with the promotion of equipment, products, appliances or systems. The trial court denied the employers' motion for an interlocutory injunction against a breach by the employee, holding that the noncompetitive provisions were void per se.
Did the trial court err in denying the motion for an interlocutory injunction and holding that the noncompetitive provisions were void per se?
The appellate court abandoned New Jersey's void per se rule in favor of a rule permitting the total or partial enforcement of noncompetitive agreements to the extent reasonable under the circumstances. Under this new rule, the noncompetition provisions were not void per se, but rather were partially enforceable to the extent reasonable under the circumstances. The court remanded the action for a determination whether the noncompetitive provision could be limited so as to be reasonable. The employee held a high executive position with the employers, but there were no determinations as to whether the employers imposed the noncompetitive provisions on the employee or whether the employers did not act in good faith in formulating the provisions.