Update on New Jersey’s Annual Push to Effectively Outlaw Noncompetes

Quick Hits

• The New Jersey Legislature is expected to reintroduce legislation during the 2026 session that would ban most noncompete agreements in the state.
• A5708 and S4385 would provide limited exceptions for senior executives, and would require employers to notify employees within thirty days of enactment that their noncompete agreements are no longer enforceable.
• With Democrats in control of both chambers of the legislature, and apparent widespread support for limits on noncompetes, a bill may pass this year that would have significant impact on employers in New Jersey.

As we described in our May 2025 article, A5708 seemingly tries to combine elements of California and Massachusetts noncompete statutes, and was similar in several respects to the Federal Trade Commission’s (FTC) proposed ban on noncompetes that did not pass, and would effectively ban most noncompetes in New Jersey.

The legislation would prohibit noncompete agreements except under limited circumstances. Notably, A5708/S4385 is retroactive and would void enforcement of current noncompete agreements. There is a limited carve-out: A5708/S4385 would not ban retroactive enforcement against “senior executives.” If the legislation goes into effect, employers would have to notify employees within thirty days of its passage that their noncompete agreements are no longer enforceable. No-poach agreements would also be outlawed.

The definition of a noncompete would be: “any agreement arising out of an existing or anticipated employment relationship between an employer and a worker, including an agreement regarding severance pay, to establish a term or condition of employment that prohibits the worker from, penalizes a worker for, or functions to prevent or hinder in any way, the worker from seeking or accepting work with a different employer after the employment relationship ends, or operating a business after the employment relationship ends.” The question, of course, is whether a nonsolicit agreement/provision or even a nondisclosure agreement/provision would still be enforceable since either type of restriction may arguably hinder an employee from accepting employment with a different employer or staring their own business.

“Senior executive” is defined as: “a worker who is in a policy-making position with an employer and is paid total compensation of not less than $151,164 during the year immediately preceding the end of employment, or not less than $151,164 when annualized if the worker was employed during only part of the preceding year.” Here the issue will be that many job categories that employers have traditionally had legitimate needs for noncompetes, such as salespeople, may not be considered in a “policy-making position.”

Noncompetes entered into before the effective date of A5708/S4385 would only be viable for senior executives if the criteria detailed in our May 2025 article are met, such as limiting their duration to twelve months, restricting their geographic scope, and requiring employers to provide “garden leave” compensation during the noncompete period.

Notably, the legislation would not apply to noncompetes entered into in the sale of a business. Nor would the bill apply to causes of action that accrue prior to the enactment of the bill, meaning any current noncompete litigations are still viable.

The legislation also would create a civil cause of action for aggrieved employees and their potential damages would include liquidated damages, compensatory damages, and attorneys’ fees.

Employers should carefully monitor the bill this spring. New Jersey’s efforts to ban noncompetes have been going on for almost a decade without success, but this year something might finally pass that will have significant impacts for New Jersey employers.

Ogletree Deakins’ Morristown office and Unfair Competition and Trade Secrets Practice Group will continue to monitor developments and will post updates on the New Jersey and Unfair Competition and Trade Secrets blogs as additional information becomes available.

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