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Heated discussion as attorneys debate merits of noncompete bill

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Former employees who qualify for unemployment benefits would no longer have to abide by agreements they had signed barring them from competing with their former employer, soliciting former customers or co-workers, or disclosing confidential company information, under an Assembly bill that has ignited heated debate in New Jersey's employment law community.

A-3970 would nullify noncompete, nonsolicitation, and confidentiality agreements in cases where the former employee qualified for jobless benefits.

“Regardless of whether or not an employee is eligible for unemployment, the employer may have legitimate interests to protect,” said employment lawyer Jed Marcus, a partner with Bressler, Amery & Ross, in Florham Park “What if someone is eligible for unemployment, and on the way out the door they steal confidential information? Shouldn’t employers be allowed to protect themselves?”

But Montclair attorney Neil Mullin, who represents employees in litigation with employers, is a strong supporter of the bill.

“Noncompetes are not only bad for employees, they are bad for the state, because they are anticompetitive by nature,” he said. “When you take a talented employee and say you can’t go over and work for a competitor, you are undermining the free market, you’re undermining competition — you are undermining the basic capitalistic principles that our country was founded on.”

On the issue of the potential theft of critical business information by departing employees, “I think there are legitimate secrets that corporations have the right to keep, otherwise, how would they do business?” Mullin said. “But corporations are in the habit of having extremely overbroad confidentially agreements … so broad you can get in trouble just using some of the business knowledge you picked up while working there.”

The bill states that, if it enacted, it would not apply to employment agreements already in effect. Fox Rothschild attorney Ian Meklinsky said employers will run into practical problems if they rush to have employees sign employment agreements, to protect themselves in the event the bill becomes law.

“If you ask 100 employees to sign but 20 refuse, what do you with those who do not sign?” he said.

Marcus said if the bill does become law, “employers are going to contest unemployment a lot more than they ever did in the past. Quite often the employer does not contest unemployment, but the stakes (will be) a lot higher.”

Marcus said confidentiality agreement are the most common, and he said New Jersey courts typically throw out or revise noncompete and nonsolicitation agreements the judges deem deems to unreasonably restrict the individual’s ability to work.

But Mullin argued these agreements “are against the freedom of the worker to go from job to job, as he or she must in this economy. It is no longer a situation where employees work for 35 years for the same employer and retire. Now, good employees work for five years or four years or six years before a company reengineers itself, and then they go to another place and another place and another place. That is the new world. All these (agreements) work against an employee surviving economically in that new reality.”

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