Validity of Non-Compete Provisions in Employment Agreement

As it pertains to non-compete clauses in an employment agreement in Pennsylvania, there is no bright line rule which states definitively the validity or “enforceability” of these provisions. In fact, Pennsylvania has no statute specifically addressing the issue of whether these sections of an employment agreement are enforceable. As a result, it has largely been left to the courts of the Commonwealth to provide clarity.

For reference, a non-compete clause typically includes the following language: “Employee agrees that for a period of “X” months after the Employee is no longer employed by Company Y, the Employee will not engage in the same or similar activities as were performed by the Employee for Company Y in any other business within a 50 miles radius of Company Y.”

Generally speaking, restrictions on a former employee’s right to work are not favored in Pennsylvania. Omicron Sys., Inc. v. Weiner, 860 A.2d 554 (Pa. Super. 2004). However, the Courts in Pennsylvania are willing to enforce non-compete covenants but only to the extent reasonably necessary for the protection of the employer’s interests. Id. In order to be deemed reasonable, and therefore enforceable, the non-compete provision must be reasonably limited in regards to (1) duration of time the non-compete provisions applies (can’t generally be for former employee’s lifetime, for example) and (2) geographical extent of the non-compete (must be limited to certain radius, can’t generally be all of the country).

So, if you’re an ex-employee seeking employment in the same field and in the same general area in violation of your employment agreement with your former employer, what should you expect? Well, if you find another job which fits these features, your former employer may file a lawsuit against you to attempt to force you to quit this new job.

As an employer, it must be clear in your non-compete clause that your sole goal is to protect your business interests. As previously stated, while these type of provisions are not necessarily favored in Pennsylvania, courts will uphold and enforce them provided they stand up to a level of scrutiny which is fairly strict. If a court is in the position of reviewing your agreement and concludes that the non-compete clause is broader than necessary to protect a legitimate business interest or simply not reasonable, they have the right to invalidate it and remove it from the employment contract.

Additionally, if you’re an employer, it’s important to take note that the inclusion of such a provision must be incident to an employment relationship between yourself and your employee. While this may seem obvious, there are minor subtleties regarding consideration for the making of a new contract. For instance, Pennsylvania Courts have ruled that if an employee is already employed and later an employer asks the employee to sign a non-compete, there must be some mutually exchanged benefit. Therefore, the employer could be required to offer additional salary or some other form of consideration in order for an agreement under such circumstances to be deemed enforceable.

If you’re an employer or employee confronting legal issues concerning a “non-compete” provision in your employment contract, the Business and Corporate Law attorneys at Howland Hess O’Connell are willing and able to assist you in handling this matter. Call for a free consultation at (215)-947-6240 or contact us online to schedule a meeting.

Legal Disclaimer: The contents of this website are intended solely for informational purposes. They neither constitute nor imply an official legal opinion on behalf of Howland, Hess, Guinan, Torpey, Cassidy and O’Connell nor do they establish an attorney-client relationship of any kind. Howland Hess O’Connell encourages all readers to seek and consult professional counsel before acting upon the information contained on this site.

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