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Executive Summary: Following last year’s unsuccessful attempt to ban noncompete agreements, New Jersey’s legislature introduced a new bill on May 19, 2025, to prohibit the use of noncompete clauses.

The Proposed Act’s Impact on New Jersey Businesses

This bill, known as “S 4385,” provides that no employer may require a noncompete agreement from any employee or other individual. Under the bill, every clause to restrain anyone from engaging in a lawful profession, trade, or business of any kind is void.

If enacted, the bill will require every covered employee with a noncompete to be advised in writing by the employer that those noncompete clauses are no longer valid and not enforceable.

The Proposed Act’s (Limited) Exceptions

The bill provides narrow exceptions to the ban on noncompete clauses:

• If a cause of action related to a noncompete clause accrued before the bill’s effective date;
• Noncompete clauses entered into by an employer under a sale of a business; or
• Noncompete clauses between employers and “senior executives” entered before the effective date of the bill, if:
  • The “senior executive” is:
    • in a “policy-making position” with an employer (meaning a business’s president, chief executive officer or any other officer or other individual with policy-making authority) and
    • paid total compensation of at least $151,164 during the year right before the end of employment; and
  • The noncompete clause states that during the restricted period, the employer shall pay the senior executive an amount equal to 100 percent of the executive’s pay; and make any benefit contributions needed to maintain the executive’s fringe benefits—unless the executive is terminated for misconduct or there is a breach by the executive;
  • The noncompete clause is not broader than necessary to protect the legitimate interests of the employer, including trade secrets and other confidentiality issues;
  • The senior executive’s restricted period is not longer than 12 months; and
  • The noncompete clause is related to the work by the senior executive and is limited to the geographic area where the work was done.

But Wait, There’s More

Any person covered by the proposed Act may sue any employer or person alleged to have violated the bill. The court has jurisdiction to void any noncompete clause and to order appropriate relief.

The bill also lets the Department of Labor and Workforce Development impose penalties on employers for failing to provide the required notifications to employees.