S4386

An Act prohibiting non-compete clauses and other restrictions on worker choice of employment and supplementing Title 34 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. The Legislature finds and declares that a worker’s ability to freely change jobs is critical to the worker’s economic liberty as well as to creating a thriving and innovative economy. Additionally, a tenet of worker protection and empowerment is that the cost of training required by an employer to perform a job should be imposed on employers, as it is employers who ultimately stand to financially benefit from a well-trained workforce. Employment provisions that have the effect of binding workers in low-wage jobs or jobs with poor working conditions, or of indebting workers to their former employers upon separation for the cost of training, have the effect of reducing those workers’ professional mobility, creating obstacles toward financial security and chilling the State economy. It is therefore in the interest of individual workers and of the State to protect workers from non-compete clauses, employment-based debts, no-poach agreements, and other restraints on worker mobility, and to assist in aligning the costs of operating a business with its financial benefits by preventing employers, after the conclusion of employment, from shifting expenses of any training they require for workers.

2. As used in the act:

“Consumer financial law” means a federal or State law that directly and specifically regulates the manner, content, or terms and conditions of any financial transaction, or any account, product, or related service, with respect to a consumer.

“Contract” includes a promise, undertaking, contract, contract clause, or agreement, whether written or oral, express or implied.

“Debt” means money, property, or their equivalent that is due or owing or alleged to be due or owing from an individual to any employer or other person, including, but not limited to, for employment-related costs, education-related costs, or a consumer financial product or service.

“Debtor” means an individual who is or may become liable to pay an employer, a prospective employer, a third-party entity, or other business entity for all or part of an employment-related cost, education-related cost, or other debt.

“Education-related cost” means a cost associated with enrollment or attendance at an educational program or training and related expenses, including, but not limited to, tuition, fees, books, supplies, student loans, examinations, and equipment required for enrollment or attendance in an educational, training, or residency program.

“Employee” includes, but is not limited to, any individual who is a full-time or part-time employee, independent contractor, extern, intern, volunteer, apprentice, or sole proprietor who provides a service or services to an employer or to a client or customer of an employer on behalf of the employer, and an individual who provides service through a business or nonprofit entity or association.

“Employer” means any person or entity that employs, hires, or contracts with employees, or any parent company, subsidiary, division, affiliate, contractor, or third-party agent of an employer.

“Employment promissory note” means any instrument, agreement, or contract provision that requires an employee to pay an employer, or the employer’s agent or assignee, a sum of money if the employee leaves the employment before the passage of a stated period of time, including any instrument, agreement, or contract provision which states that the payment constitutes reimbursement for training provided to the employee by the employer or by a third party.

“Employment-related cost” means a necessary expenditure or loss incurred by an employee in direct consequence of the discharge of their duties at work or of their obedience to a direction of their employer, including, but not limited to, equipment or a training, residency, orientation, or competency validation required either by an employer or to practice in a specific employee classification.

“Non-compete clause” means any contract or agreement, or provision of a contract or agreement, or term of employment, between an employer and an employee that prohibits an employee from, penalizes the employee for, or functions to prevent the employee from, seeking or accepting employment with any person, or operating a business, after the conclusion of the employee’s employment with the employer.

“No-poach agreement” means any agreement between employers or between an employer acting as a contractor and any person acting as a contractee that restricts or hinders the ability of an employer to contract for the services of an employee or prospective employee.

“Person” means an individual or an entity, including, but not limited to, a corporation, partnership, association, trust, limited liability company, cooperative, or other organization.

“State wage, benefit and tax laws” has the same meaning as provided in section 1 of P.L.2009, c.194 (C.34:1A-1.11).

3. a. Any non-compete clause by which any employee is restrained from engaging in a lawful profession, trade, or business of any kind after the conclusion of the employee’s employment with the employer, is against public policy, void and unenforceable, including any clause or agreement which was entered into or in effect on or before the effective date of this act.

b. It is unlawful for an employer to enter into, attempt to enter into, present to an employee, past employee, or prospective employee as a term of employment, or attempt to enforce, or represent that the employee is subject to, any contract that restrains an employee from engaging in a lawful profession, trade, or business of any kind after the conclusion of the employee’s employment with the employer, including, but not limited to:

(1) a non-compete clause;

(2) a term that requires a debtor to pay for a debt if the debtor’s employment or work relationship with the employer is terminated; or

(3) any term that imposes any penalty, fee, or cost on an employee for terminating the employment relationship, including, but not limited to, an employment promissory note, a replacement hire fee, a retraining fee, reimbursement for immigration or visa-related costs, bondage fees, liquidated damages, lost goodwill, or lost profit.

c. Every employer shall notify, not more than 30 days after the effective date of this act, every current employee that any non-compete clause or other agreement which restrains an employee from engaging in a lawful profession, trade, or business of any kind after the conclusion of employment, or which in any way violates the provisions of subsections a. and b. of this section, including any clause or agreement which was entered into or in effect on or before the effective date of this act, is against public policy, void and unenforceable against the employee;

d. Every employer shall notify any past employee with whom the employer has contact, and with whom the employer had, during the employees employment with the employer, entered into a non-compete clause, that the non-compete clause is void and unenforceable against the employee, not more than 30 days after the effective date of this act, and immediately whenever the past employee requests information about the contract, and immediately whenever the employee is subject to an action which may be in any way based on, or in any way related to, the non-compete clause.

e.(1) This act applies to a contract or contractual term regardless of whether the debt is certain, contingent, or incurred voluntarily.

(2) This act applies to a contract or contractual term in which an employer promises to pay or forgive a debt, defers liability of a debt, or holds a debt in forbearance.

(3) Nothing in this act shall be construed as preventing a person or governmental entity from paying or forgiving a debt or from providing other benefits to a debtor or other individual after the debtor or individual completes a specified time period of employment or work relationship with an employer or other business entity.

(4) Nothing in this act shall be construed to limit or prohibit any loan repayment assistance program or loan forgiveness program provided by a federal, State, or local governmental agency.

4. No-poach agreements are hereby declared to be contrary to public policy and any no-poach agreement, including a no-poach agreement which was entered into or in effect on or before the effective date of this act, is void and unenforceable.

5. a. An employee who is subject to a non-compete clause or a no-poach agreement, or who otherwise suffers harm because of a violation of the provisions of this act, or a representative of the employee, may bring a civil action on behalf of the employee, other persons similarly situated, or both, in a court of competent jurisdiction, which shall, upon a finding that a violation has been committed by an employer, order all appropriate relief, including: enjoining the conduct of any person or employer; ordering payment of liquidated damages; and awarding lost compensation, actual damages, punitive damages of not more than $5,000 per employee, reasonable attorneys’ fees and costs, and injunctive relief. The employee shall bring an action not more than two years after the later of when:

(1) the agreement was entered into;

(2) the employee learns of the prohibited agreement;

(3) the employment relationship is terminated; or

(4) the employer takes any step to enforce the agreement or otherwise commits a violation.

b. As an alternative, the employee may submit the complaint to the Attorney General or the Commissioner of Labor and Workforce Development, who shall receive and investigate complaints from persons alleging a violations of this act. If, after examining a complaint and the evidence, the Attorney General or the Commissioner of Labor and Workforce Development find that a violation has occurred, the Attorney General or the Commissioner of Labor and Workforce Development may bring an action to enforce this act. The Attorney General and the Commissioner of Labor and Workforce Development shall enter into agreements to coordinate responsibility with respect to enforcement of this act.

c. This act shall not be construed as limiting the powers or authorities of the Attorney General or Commissioner of Labor and Workforce Development, including, but not limited to, the Attorney General’s ability to prosecute violations of civil or criminal laws, including any consumer financial law or laws against unfair competition or false advertising, and the Commissioner of Labor and Workforce Development’s ability to prosecute violations of State wage, benefit and tax laws.

6. a. An employer shall not require an employee who primarily works in New Jersey, as a condition of employment, to agree to a provision that would either require the employee to adjudicate outside of New Jersey claim arising in New Jersey, or deprive the employee of the substantive protection of New Jersey law with respect to a controversy arising in New Jersey. Any provision of a contract that violates this section is void and the matter shall be adjudicated in New Jersey and New Jersey law shall govern the dispute.

7. The Commissioner of Labor and Workforce Development, in consultation with the Attorney General shall, pursuant to the "Administrative Procedure Act," P.L.1968, c. 410 (C. 52:14B-1 et seq.), adopt regulations for the implementation and enforcement of this act. The commissioner and Attorney General may enter into an agreement with respect to the coordination of civil actions and other enforcement activities of commissioner and Attorney General.

8. This act shall take effect on the 90th day after enactment.

STATEMENT

This bill prohibits non-compete clauses and certain other agreements between an employer and employee that restrict employment choices after the conclusion of the employee’s employment with the employer. The bill makes it illegal for an employer to enter into, attempt to enter into, present to an employee, past employee, or prospective employee as a term of employment, or attempt to enforce, or represent that the employee is subject to, any contract that restrains an employee from engaging in a lawful profession, trade, or business of any kind after the conclusion of the employee’s employment with the employer, including, but not limited to:

1. a non-compete clause;

2. a term that requires a debtor to pay for a debt if the debtor’s employment or work relationship with the employer is terminated; or

3. any term that imposes any penalties, fees, or costs to an employee for terminating the employment relationship, including employment promissory notes, replacement hire fees, retraining fees, reimbursement for immigration or visa-related costs, bondage fees, liquidated damages, lost goodwill, or lost profit.

Every employer is required to:

1. notify, not more than 30 days after the effective date of the bill, every current employee that any non-compete clause or other agreement which restrains an employee from engaging in a lawful profession, trade, or business of any kind after the conclusion of employment, or which in any way violates the provisions of the bill, including any clause or agreement which was entered into or in effect on or before the effective date of the bill, is against public policy, void and unenforceable against the employee; and

2. notify every past employee with whom the employer has contact, and with whom the employer had entered into a non-compete clause, that the clause is void and unenforceable, within 30 days after the bill’s effective date, and immediately whenever the employee requests information about the clause, or is subject to an action based on or related to the clause.

The bill also designates no-poach agreements between employers and employees, including a no-poach agreements entered into or in effect on or before the effective date of the bill, to be contrary to public policy and void and unenforceable.

The bill permits an employee who is subject to a non-compete clause or a no-poach agreement, or who otherwise suffers harm because of a violation of the provisions of the bill, or a representative of the employee, to bring a civil action on behalf of the employee, other persons similarly situated, or both, in a court of competent jurisdiction for actual damages, punitive damages of not more than $5,000, reasonable costs and attorney’s fees. The bill also authorizes the Attorney General or the Commissioner of Labor and Workforce Development to accept complaints and bring actions to enforce the bill.