Non-compete Agreements in Pennsylvania

Non-Compete AgreementNon-competes are becoming more common for Pennsylvania employees, and they raise a lot of legal questions. Nowadays, it is not uncommon for employers to require their employees to sign non-competition agreements to prevent them from competing with the company after they have left. While these agreements have become standard practice, employers can abuse this tool and create agreements that are overly broad, preventing employees from seeking reasonable employment opportunities elsewhere. If you are facing difficulties because of your non-compete agreement, or if you are unsure whether or not to sign a non-compete agreement, call Kraemer, Manes & Associates. Our non-compete attorneys can help you understand the terms of your non-compete agreement and can fight to ensure you are not unduly restricted.

Call KM&A at 412-626-5626 or email a non-compete attorney at lawyer@lawkm.com.

Non-compete Agreements Defined

A non-compete agreement, also called a restrictive covenant, is a contract in which an employee agrees not to compete with the employer’s business for a period of time after the employment relationship has been terminated. These agreements restrict who an employee can work for within a certain geographic scope for a specified time period after the employment relationship ends. Non-compete agreements are common for executives and sales people, as well as people employed in the tech, medical, and service industries.

Enforceability of Non-compete Agreements

While Pennsylvania courts generally do not favor non-competes, they can be enforceable. The Supreme Court has held that in order for a non-compete agreement to be enforceable, the contract must be:

  1. Incident to an employment relationship between the parties
  2. Supported by adequate consideration
  3. Restrictions imposed are reasonably necessary for the protection of legitimate interest of the employer
  4. Restrictions imposed are reasonably limited in geographical and durational extent.

Incident to an Employment Relationship Between the Parties

This prong is fairly straightforward. In order for a non-compete agreement to be enforceable, it must relate to an employee’s work with his or her employer.

Supported by Adequate Consideration

Prong two requires that the employee receive something for signing the non-compete. Normally this prong is satisfied when the non-compete is signed prior to or close to the beginning of the employment relationship. In those cases, the offer of employment acts as “adequate consideration” to make the non-compete agreement enforceable.

Occasionally, an employer will want an employee to sign a non-compete well into the employment relationship. When the employer wants to do so, the employer needs to give something additional to the employee in order for the contract to be valid. If an employee signed his or her agreement well into the course of his or her employment, it must have been accompanied by some sort of compensation, such as:

  • A raise or a bonus that was not already anticipated
  • A new benefits package
  • A switch from independent contractor to employee status
  • A switch from part-time to full-time employment status

If an employee signs a non-compete agreement based on the threat that he or she will be fired if he or she does not sign, then the agreement will likely be unenforceable due to lack of consideration. Likewise, if an employee signs a non-compete agreement in exchange for a new job title but does not receive any additional monetary benefit as a result of the transaction, the agreement may be unenforceable.

Restrictions Imposed are Reasonably Necessary for the Protection of the Legitimate Interests of the Employer

The third prong requires that the non-compete be related to the legitimate interests of the business. An employer who requires a non-compete simply as a measure to discourage its employees from terminating the employment relationship is not enough. Legitimate interests include the protection of trade secrets, client relationships, substantial training, and confidential business information.

Employees who are privy to confidential business information, or who possess a specific set of skills giving them a competitive advantage in the industry, will often have more difficulty fighting a non-compete agreement, since their former employers have more to lose by allowing them to join a competing company. On the other hand, employees such as clerical or warehouse staff will often find it easier to get out of a non-compete agreement, since they oftentimes are not privy to confidential information and do not have a specific set of skills that the employer cannot find elsewhere.

Restrictions Imposed are Reasonably Limited in Geographical and Durational Extent

Non-compete agreements are not allowed to extend too long or too far. The restrictions they place on where a departing employee is unable to work and for how long that employee will be unable to work there can only be broad enough to protect the employer’s legitimate interests, as discussed above.

There is no set time or geographic limitation for non-competes; both of these questions depend on the industry in which the employer operates as well as the importance of the position of the departing employee within the company. Employees who were privy to confidential business information, or who possessed a specific set of skills giving them a competitive advantage in the industry, will often have more lengthy and geographically restrictive agreements than those who pose less of a threat to the success of the business after they leave, such as clerical or warehouse workers.

Generally, in Pennsylvania, courts have upheld non-competes lasting one to three years. Geographical limitations can vary widely among industries, being as small as a fifty mile radius around the employer’s place of business, and as large as several states.

Fighting a Non-Compete Agreement

Fight a non-competeAn employee can go about fighting a non-compete agreement in a number of ways. Below are some of the most common (and most effective) ways in which employees and their non-compete lawyers have gotten around a signed agreement.

  • Where an employee signed a non-compete agreement well into the course of his or her employment, that employee can attack the agreement on the grounds that he or she did not receive adequate consideration for signing it.
  • An employee can argue that the employer has no legitimate business interest to protect, and thus the contract should not be enforced. This claim can be effective where the employee is not in control of any trade secrets or valuable confidential information, does not have any good will associated with their client relationships, and does not have any specialized training that would make his or her services a competitive advantage within the field.
  • While there is no set limit on how long a non-compete agreement can last, employees can attack the validity of an agreement by claiming that it spans for too long a duration. As mentioned above, this determination will depend on the type of business, the skills of the employee, and a number of other factors.
  • As with duration, there is no set limit on the geographic area a non-compete agreement can span. However, employees can attack a non-compete agreement by claiming that it spans too broad a geographic area.

As with most employer/employee disputes, the arguments that work best for you will depend on the nature of your situation. Sitting down with an experienced non-compete attorney will help you get a better sense of the ways in which your non-compete agreement is unfair and help you formulate how exactly you want to attack its enforceability.

Violating a Non-Compete Agreement

Regardless of who you worked for or what your job title was, violating a non-compete agreement can lead to serious consequences. If you have been told that your actions are in violation of such an agreement, it is imperative to contact a non-compete lawyer as soon as possible.

The most typical remedy employers have when dealing with a former employee who has breached a non-compete is to file a lawsuit against the employee requesting an injunction. If the court grants an injunction, the employee will be prevented from accepting a job position or taking any other action in violation of the non-compete. In certain circumstances, the employer may also sue the employee for compensatory and punitive damages as a result of the breach of contract.

Signing a Non-Compete Agreement

If you feel that the terms of your employer’s non-compete agreement are unreasonable, or you have questions as to how a non-compete agreement might impact you in the future, it is best to wait until you have consulted an experienced non-compete lawyer before signing. It is easier to negotiate the terms of a non-compete agreement before it is signed than to fight its validity after the fact.

Whether or not the non-compete agreement with which you are faced is enforceable will depend on the industry in which you work, the job position you held, the terms of the agreement, and a number of other factors specific to your case. If you have questions about non-compete agreements, or if you feel that you are being unfairly restricted from seeking other employment opportunities as a result of a non-compete agreement, call Kraemer, Manes & Associates at (412) 626-5626. Our experienced non-compete attorneys will help you understand the nuances of your situation and guide you on a course of action that is right for you.

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