A New Jersey bill that would ban most worker noncompete restrictive covenants (A5708) cleared the Assembly Labor Committee on December 4, 2025, in a bipartisan 8-2 vote. On the same day, the bill was referred to the Assembly Regulated Professions Committee and may be headed to the Assembly floor before the Legislature adjourns on January 12, 2026. An identical companion bill in the New Jersey Senate (S4385) was introduced on May 19, 2025, but remains in the Senate Labor Committee.
After several years of similar proposed legislation dying in the Legislature, this bill’s momentum signals potential passage for several reasons: (1) Governor Murphy may want to end his term with this marquee employee-friendly legislation; (2) the Federal Trade Commission recently abandoned its federal noncompete ban, leaving states to take the lead on efforts to increase employee mobility; (3) the bill sponsor chairs the Assembly Labor Committee; and (4) the bill passed in committee with bipartisan support.
Bill Details
Noncompete Prohibition: If enacted, this legislation would void most employment noncompete restrictions — including those in existing agreements. The bill provides a nominal “senior executive” exception (discussed below); however, the exception’s restrictions render it very limited.
- Definition of prohibited “noncompete”: Noncompete clause means any agreement “arising out of an existing or anticipated employment relationship” that “prohibits the worker from, penalizes a worker for, or functions to prevent or hinder in any way” seeking other employment or operating a business.
- Coverage; ambiguity over independent contractors: The prohibition applies to all workers, current and former, paid or unpaid, at every level. “Worker” is broadly defined to include individuals who work as an “employee, independent contractor, extern, intern, volunteer, apprentice, or sole proprietor, or a worker who works for a franchisee or franchisor.”
The proposed bill text does leave ambiguity, however, because a prohibited noncompete clause must arise from an “employment relationship” and discusses “termination of employment.” Unless this language is reconciled by committee or floor amendment, the conflicting terms will create uncertainty and likely lead to litigation over the legislation’s scope.Notably, the bill’s current language already excepts “a franchisee in the context of a franchisee-franchisor relationship[s]” from the definition of worker.
Retroactivity: All existing noncompetes with nonsenior executives would become unenforceable immediately.
- Mandatory posting/notice language: Employers would have 30 business days to notify workers that the noncompete clause will not be, and cannot legally be, enforced against the worker. The bill includes model language that would constitute the required notice. In addition, the bill would require every employer to post a copy of the law or a summary approved by the New Jersey Department of Labor and Workforce Development in a prominent place in the work area. An employer could face administrative penalties from the New Jersey Department of Labor and Workforce Development for noncompliance with these notice and posting mandates, including a written warning for the first violation; up to a $250 fine for a second violation; and up to a $1,000 fine for a third and any subsequent violations.
- Limited enforcement of existing noncompetes: While the bill would void existing noncompetes for most workers, it does provide a limited window for employers to pursue causes of action that have accrued before the legislation’s effective date.
- Private right of action/remedies: The law would provide a private right of action and authorizes courts to award (1) injunctive relief; (2) liquidated damages up to $10,000; (3) lost compensation; and (4) attorneys’ fees. The law would also create a two-year statute limitations period for workers to bring a civil lawsuit, beginning to run from the later of: (a) entering into the prohibited agreement with the employer, (b) learning of the existence of the prohibited agreement, (c) terminating the employment relationship, or (d) upon the employer taking any step to enforce the prohibited agreement.
- No Poach Prohibition: Any agreement between employers restricting hiring would be void, including franchise agreements, vendor contracts, staffing arrangements and joint ventures.
Exceptions to the Prohibition on Noncompetes
Exception 1: Senior Executives (Very Limited; Applies to Existing Agreements Only)
Under this exception, the “senior executive” must (1) must hold a “policy-making position” (i.e., president, CEO or the equivalent, or any other officer (defined as president, vice president, secretary, treasurer, principal financial officer, comptroller, principal accounting officer or any individual routinely performing corresponding functions) with policy-making authority to control significant aspects of the business entity or common enterprise); and (2) earn $151,164 or more (including salary, commissions, nondiscretionary bonuses and other nondiscretionary compensation only) during the year immediately preceding end of employment, or not less than that amount when annualized if only employed part of preceding year. Also, employers cannot enter new noncompetes with executives after the law’s effective date.
But even for qualifying senior executives, enforceability of an existing noncompete clause requires satisfaction of ALL the following:
- Least restrictive, reasonableness: Cannot be broader than necessary to protect the employer’s legitimate interests, including trade secrets and other confidentiality issues, and cannot be “unduly burdensome on the worker, injurious to the public, or inconsistent with public policy.”
- Duration: 12-month maximum period following termination.
- Geography: Limited to areas where the senior executive “provided services or had a material presence or influence” in the last two years of employment, and “shall not prohibit the worker from seeking employment in other states” (practically speaking, this offers little real-world protection for a regional or national employer preventing a New Jersey employee from working in nearby states or elsewhere).
- Garden leave: Must pay 100% of salary and full benefits during the restriction period unless the worker is terminated for misconduct or there is a breach by the worker.
- Narrowly tailored: Must prove customer, client, referral source or vendor nonsolicits, employee nonsolicits, and NDAs/confidentiality agreements would be insufficient to adequately protect the employer’s interests, which could be a high burden to satisfy.
- Customer loophole: Cannot restrict a senior executive from providing a service to a customer or client of the employer, if the worker does not initiate or solicit the customer or client.
- No fee-shifting: Employer cannot recover attorneys’ fees even if it prevails, because a worker cannot be “penalized” for challenging the noncompete.
- 10-day notice requirement: Employer must notify the senior executive of intent to enforce the noncompete clause within 10 days of the senior executive’s termination — otherwise the restriction is automatically void.
- Other conditions: Cannot contain a choice-of-law provision avoiding New Jersey law (so long as the worker was a resident or employed in New Jersey for at least 30 days preceding termination of employment), and cannot waive workers’ rights under this statute or any other laws and regulations.
Exception 2: Business Sale
This exception would protect noncompetes in the context of mergers and acquisitions, including the sale of a business entity, an employer’s ownership interest, or substantially all of a business entity’s operating assets.
What Survives the Ban? Nonsolicits and NDAs.
This legislation targets agreements that prevent workers from “seeking or accepting work” or “operating a business,” and agreements that “hinder[] the ability of an employer to hire, or contract for the services of, a worker.” That excludes from the legislation’s scope (1) customer/client nonsolicitation restrictions; (2) employee nonsolicitation restrictions; and (3) nondisclosure/confidentiality agreements. Section 4(b) of the bill explicitly references nonsolicit agreements and NDAs as presumptively reasonable alternatives to noncompetes, effectively endorsing their continued validity as a matter of public policy.
Still, the bill’s prohibitive scope extends to agreements that “function[] to prevent or hinder in any way . . . worker[s] from seeking or accepting work with a different employer after the employment relationship ends, or operating a business after the employment relationship ends.” If enacted, we expect challenges to nonsolicitation restrictions under a theory that those agreements “hinder” competitive employment.
We continue to monitor the bill’s status and will provide updates on legislative developments.
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