NJBIA testified against several bills advanced by the Assembly Labor Committee on Thursday, saying they would negatively impact New Jersey businesses.
Bill A-3715 would limit the provisions and enforceability of restrictive covenants, severely striking at an employer’s ability to protect their legitimate business interests.
NJBIA Director of Government Affairs Alexis Bailey
“As we try to reclaim New Jersey’s status as an innovation state and encourage new startups and increase patents, this legislation runs counter to those goals,” NJBIA Director of Government Affairs Alexis Bailey said in written testimony to the committee.
Restrictive covenants are agreements between employers and employees where the employee agrees not to engage in certain specified activities that are competitive with the employer after the relationship has ended.
Bailey said that the legal system usually adjudicates the best way for both the employer and employee to retain their protections after separation. She said the legislation goes far beyond protecting low-income workers, who would not typically be bound by post-employment restrictions.
“This bill would limit the ability of employers to place post-employment restrictions on higher income earners who may know intimate details about business operations,” Bailey said. “Higher income earners often have the most leverage when moving between jobs.
“When assessing restrictive covenants that can be placed on high-wage earners, we should have a meaningful discussion on reasonable time and geographic scope restrictions that protect employers and do not severely hinder employees.”
NJBIA recommended the bill’s sponsors amend the bill to only cover post-employment restrictions on workers making less than $65,000 and clarify that employers may place appropriate restrictive covenants on all employees and independent contractors to protect proprietary information.
NJBIA also opposed bill A-1474, which provides certain protections and rights for temporary laborers.
NJBIA fully supports rooting out bad actors and ensuring all workers employed by temporary help service firms are treated fairly, as well as measures of transparency for workers and for third-party companies utilizing the services of temp agencies.However, the association opposes the legislation due to the third-party companies and temporary help service firms being held jointly responsible for violations of the bill and the private cause of action provisions that will result in frivolous lawsuits for third-party companies using temp agencies.
“This provision, coupled with the extensive legal remedies listed in bill, will lead to the possibility of litigation for third-party businesses utilizing workers from a properly registered temporary help service firm if that firm does something wrong,” Bailey said in written testimony.
“A minor error or egregious violation of the law could put a third-party company at risk over something they may have no control over or knowledge of.”
Bailey said the bill also provides for liquidated damages and attorneys’ fees, which will “encourage class action suits with the goal of large settlement payouts.” NJBIA instead encouraged placing authority over such matters with the Department of Labor and Workforce Development, rather than facilitating costly litigation.
NJBIA also opposed bill A-822, which creates the “New Jersey Domestic Workers’ Bill of Rights Act.”
Bailey said the bill goes well beyond protecting domestic workers from exploitation and mandates an extensive number of employee benefits that are unheard of in other parts of the workforce.
The bill also establishes an ABC test to determine worker classification in the state workers’ compensation law.
The Assembly Labor Committee voted 6-3 to release A-3715 and A-1474. Bill A-822 was released by a 7-2 vote.
