NJ’s Employment Agency Registration Act Remains an Effective Defense in Noncompete Litigation

New Jersey is home to over two thousand employment agencies, consulting firms, and career consulting or outplacement agencies, according to the latest government figures. http://www.state.nj.us/lps/ca/proposal/person107.htm. Many of these firms provide highly educated and highly skilled consultants to the State’s largest employers, including those in the pharmaceutical, chemical, insurance, and financial industries. Employment agencies typically require its consultants to sign non-compete agreements before they commence working with an end-client. They do so to prevent the consultant from “eliminating the middleman” and working for the end-client directly. But are these non-competes enforceable?

One defense to non-compete litigation which my firm has used to good effect is based on the New Jersey Employment and Personnel Services Act. This law requires employment agencies and temporary help firms to obtain a license from, or register with, the New Jersey Division of Consumer Protection. If the employment firm is not in compliance with this law, any contracts it makes with its consultants, including non-compete agreements, are unenforceable. Surprisingly, many employment agencies are either unaware of this law or don’t care enough to comply. They are in for a very rude awakening when they sue one of my clients.

I would suggest that if you are asked to sign a non-compete by your employment agency, do a quick search at http://www.njconsumeraffairs.gov/ocp/agency.pdf to determine whether the agency is properly registered or licensed. Then get some advice from an experienced non-compete attorney who can lay out your legal options and give you the advice you need to move forward.