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A close look at non-compete terms in a contract dispute

| Apr 21, 2021 | Business Litigation

Employment contracts are an important tool for most types of companies. In this type of contract, a New Jersey employer can outline expectations and responsibilities for both parties during the employment term, reducing the chance of a conflict. It is also possible to include terms that will protect the interests of the business, such as a non-compete clause. There are situations where an employer and employee may become involved in a dispute over the terms of a contract, specifically the non-compete agreement.

The intent of a non-compete clause in an employment contract is to prevent a former employee from leaving the company to work for direct competition. This helps protect important proprietary information, such as client lists, secret formulas, protected processes and more. If there is a dispute over the contract, the court will closely and carefully scrutinize and review details and specific terminology.

What should be in it?

A court will take a close look at the terms of the contract in order to determine if the agreement is enforceable. Some of the factors that will determine enforceability include:

  • Proof of consideration at the time both parties signed the contract
  • Proof that the non-compete clause protects the financial interests of the employer
  • Proof that the clause and contract are reasonable in their scope, geography and time

There are valid reasons why a business needs a non-compete clause included in their employment contracts. However, it is essential to give careful consideration to the exact terms used in the event of confusion or a possible dispute in the future. A business has the right to protect its interests in its relationships with employees, even after the employee no longer works for that specific company.

Strong contracts

The foundation for good relationships with employees is a good employment contract. This can provide protection and benefits for both sides. If including a non-compete clause, it is helpful to consider learning how to implement these terms effectively and in a way that will withstand scrutiny.

If there is a dispute and litigation is necessary, the reasonableness and enforceability of a contract will play a significant role in the outcome of the lawsuit. Starting with a strong contract will reduce the chance of this happening as well as provide protection in the event of an issues with an employee working with the competition.