Restrictive Covenant Enforcement

Restrictive Covenant Enforcement Involves Four Requirements

Obtaining an employee's signature on a post-employment restriction is simpler than restrictive covenant enforcement. By the way, I detailed the types of restrictive covenants in this post. For example, the former is like a level road with a few curves; the latter is like a twisting mountain highway. Consequently, courts do not view post-employment restrictive covenants favorably because the law prohibits restraints on competition.

The courts will restrain an ex-employee from violating a restrictive covenant only when the circumstances make it reasonable to enforce it. However, a Pennsylvania court will look only at the terms if the ex-employer sues for damages, not an injunction. It will not consider the reasonableness of the agreement.

There's an easy acronym for the four requirements for restrictive covenant enforcement -- ACRE. It stands for Ancillary, Consideration, Reasonable Terms, and Equitable to Enforce.

1. Ancillary

A non-compete or non-solicit must be ancillary to an employment or legally enforceable relationship. But the vast majority of restrictive covenants accompany employment relationships. Other associations that support restrictive covenants include independent contractor agreements, sales of businesses, franchises, distributorships, and joint ventures.

2. Consideration

For restrictive covenant enforcement, consideration must support the non-compete or non-solicit. Commencement of employment helps determine consideration, but an employer who extends a comprehensive pre-employment offer must include information about a restrictive covenant with the offer.

For current employees, consideration must include a significant enough benefit to the employee to offset the burden of new post-employment restrictions. The test of what benefit is enough is very much a case-by-case analysis. Mere continuation of at-will employment is insufficient; "sign or hit the road" is inadequate.

In the case of Socko v. Mid-Atlantic Systems, the Pennsylvania Supreme Court has just held that consideration is still needed for restrictive covenant enforcement when a current employee signs a restrictive covenant that the parties intend to be legally bound. However, Pennsylvania's Uniform Written Obligations Act provides that a contract will not be unenforceable for lack of consideration where the parties recite that they intend to be legally bound.

3. Reasonableness

The non-compete or non-solicit must be reasonably necessary to protect the employer's legitimate interests and reasonable in length and geographic scope. For example, the employer's legitimate interests include goodwill, customer relations, trade secrets, confidential business information, and specialized skills or training.

Reasonableness of length depends on the time the employer needs to hire and train a new employee and restore customer relations and goodwill. Restrictive covenants of one year are generally reasonable for employees. Longer (sometimes much longer) durations are appropriate for the sale of a business. Reasonableness of geographic scope depends on the area necessary to protect the employer's business.

Generally, a restrictive covenant that covers the territory served by the employee will be reasonable. However, greed does not pay: An employer who asked the court for protection everywhere except "the North Pole and Tibet" left the court without restrictive covenant enforcement.

4. Equitable

Finally, the court will look to the case's facts to ensure that restrictive covenant enforcement is fair. The court may refuse to enforce a non-compete if the employer has discharged the employee through no fault on the employee's part. Examples of a no-fault discharge include a layoff or termination for poor performance despite the employee's best efforts. Other facts that may lead a court to deny enforcement are

    • sexual harassment of the employee
    • failure to pay an employee
    • poor handling of business that makes the loss of business the employer's fault
    • the employer's past violation of a restriction in hiring the employee it now seeks to restrict.

Pennsylvania's Blue Pencil Rule for Restrictive Covenant Enforcement

It is important to remember that Pennsylvania follows the "blue pencil" rule that allows courts to modify restrictive covenants so that the terms are reasonable to enforce. Therefore, before enjoining an ex-employee, the courts always consider whether it is necessary to limit the terms of the non-compete or non-solicit agreement. Even where the law and facts support restrictive covenant enforcement, there is no complete guarantee the court will enforce a restrictive covenant fully.

For more information, including what it takes to draft and enforce a valid restrictive covenant, feel free to contact Thomas Rees via email at The employment lawyers at our Doylestown and Norristown law firm are here to help.

The information above is general: we recommend you consult an employment lawyer regarding your circumstances. The content of this information is not meant to be considered legal advice or a substitute for legal representation.

The 7 Types of Restrictive Covenants to Know

Post-employment restrictive covenants in PA come in multiple varieties and the non-compete covenant is the most burdensome of all.

Most people have heard, and are likely familiar with, the term noncompete, otherwise know as a restrictive covenant. It’s not uncommon for an employer to ask an employee to sign a non-compete clause, which sets limitations on competing employment after the employee’s current job ends. You may have heard of non-competes because of high-profile cases involving executives or broadcast personalities who are invited to join a competing employer.

But, media spotlight aside, post-employment restrictions come in multiple varieties and the non-compete covenant is the most burdensome of all post-employment restrictive covenants. Other restrictions that are easier to create and manage may serve an employer just as well.

Pennsylvania recognizes two types of non-competes. The “general non-compete” prohibits an ex-employee from working for a competing employer for a stated time period after leaving a job. The “specific non-compete” is narrower- it keeps the ex-employee from doing business with customers for a set time period, but does not prohibit working for a competitor.

A third and less strict restrictive covenant is the “customer non-solicitation covenant,” which prevents the former employee only from initiating contact with customers (or even prospects) after leaving a job. A non-solicit does not bar an ex-employee from doing business with a customer that initiates contact with the ex-employee.

Further down the ladder is the “employee non-solicitation covenant,” sometimes called an anti-piracy clause. These agreements prohibit ex-employees from soliciting other former co-workers to leave and join up with the new employer. The courts hesitate to enforce anti-piracy clauses without evidence of an intention to destroy a competitor.

The fifth type of restrictive covenant is the “confidentiality or non-disclosure clause.” These agreements prohibit ex-employees from using or disclosing the employer’s confidential business information. Technically these clauses are not essential to protect confidential information. Trade secret law, now embodied in the Pennsylvania Uniform Trade Secrets Act, does this job as well. But many employers also want an explicit prohibition on misuse of employer secrets to bolster any trade secret claim.

The sixth and newest restrictive covenant is the “garden leave” requirement. This restriction is really a “pre-post-employment” restriction and is most common in high-end financial services work. Once the employer has notice of an employee’s impending departure, the employer sends the employee home to “the garden” for an extended period. During garden leave, the employee is still on the old employer’s payroll, but may not perform any work for the old or new employer and may not contact clients or customers. The employer uses the employee’s garden leave to cement relations with the employee’s clients so the clients do not follow the ex-employee to the new employer. A variation on garden leave is “bench pay,” where an employer has to pay an ex-employee who can show that the non-compete has prevented acceptance of a new position during the restricted period.

The seventh restrictive covenant is the assignment of property rights, generally the rights to own, patent, copyright, or trademark items developed during employment. This assignment is essential where an employee develops inventions of possible value to the employer.

This is a basic introduction to the world of restrictive covenants. For more information, including what it takes to draft and enforce a valid restrictive covenant, feel free to contact Thomas Rees via email,

The information above is general: we recommend that you consult an employement lawyer at our Doylestown and Norristown law firm regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

Facebook and Employee Discipline: Employers “Dislike” the NLRB

November 16, 2015

By James B. Shrimp, Esq.

Can an employer get into trouble for firing an employee over something the employee wrote on Facebook? Apparently, yes.

Facebook and Employee Discipline

The United States Second Circuit Court of Appeals recently agreed with the National Labor Relations Board (NLRB) that an employer violated the National Labor Relations Act “by taking certain actions against its employees, including discharge, for their Facebook activity.” The Second Circuit further found that the employer’s social media policy violated the Act.

Importantly, this decision applies to both union and non-union shops. In fact, over the last several years the NLRB has increasingly used its enforcement powers against non-union employers.

An Employee’s Protections Under the Act

The Act guarantees that “employees shall have the right to self-organization, to form, join, or assist labor organizations … and to engage in other concerted activities for the purpose of … mutual aid of protection…” The Act protects an employee’s rights by prohibiting an employer from interfering with, restraining, or coercing employees in the exercise of these rights.

An employee’s rights have to be balanced against an employer’s interest in preventing disparagement of its products or services and protecting the reputation of the business. Thus, an employee’s communications may lose protection if they are sufficiently disloyal or defamatory. Importantly, if an employee relays in good faith what he has been told by another employee, reasonably believing it to be true, the fact that the initial report was inaccurate does not eliminate the employee’s protection.

The Triple Play Sports Bar - Facts

The NLRB’s decision in a case at the Triple Play Sports Bar serves as a cautionary tale for employers. Here are the details of the case, which can be ound at 361 NLRB 31 (August 22, 2014). I have cleaned up the language a bit for family consumption, just in case you want to read this to your kids at bedtime.

“The employer employed Jillian Sanzone as a waitress and bartender, and Vincent Spinella as a cook. In approximately January 2011, Sanzone and at least one other employee discovered that they owed more in State income taxes than they had expected. Sanzone discussed this at work with other employees, and some employees complained to the employer. In response to the complaints, the employer planned a staff meeting for February with its payroll provider to discuss the employees’ concerns.

Sanzone, Spinella, and former employee Jamie LaFrance, who left the employer’s employ in November 2010, have Facebook accounts. On January 31, LaFrance posted the following “status update” to her Facebook page:

Maybe someone should do the owners of Triple Play a favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I OWE money...Wtf!!!!

The following pertinent comments were posted to LaFrance’s page in response:

DESANTIS (a Facebook “friend” of LaFrance’s and a customer): “You owe them money...that’s f*%&ed up.”

                                                *                      *                      *

LAFRANCE: “The state. Not Triple Play. I would never give that place a penny of my money.

Ralph [DelBuono] f*%&ed up the paperwork…as per usual.”

DESANTIS: “yeah I really dont go to that place anymore.”

LAFRANCE: “It’s all Ralph’s fault. He didn’t do the paperwork right. I’m calling the labor board to look into it bc he still owes me about 2000 in paychecks.”

(At this juncture, employee Spinella selected the “Like” option under LaFrance’s initial status update. The discussion continued as follows.)

                                                *                      *                      *

SANZONE: “I owe too. Such an a**hole.”

Sanzone added her comment from her cell phone on February 1. On February 2, when Sanzone reported to work, the employer told her she was being discharged. When Sanzone asked why, the employer, having learned of the Facebook post, responded that she was not loyal enough to be working for the employer because of her Facebook comment.

When Spinella reported for work on February 3, he was summoned to a meeting. The Facebook comments from LaFrance’s account were displayed on a computer screen in the office. After asking Spinella if he “had a problem with them, or the company,” he was interrogated about the Facebook discussion, the meaning of his “Like” selection, the identity of the other people who had participated in the conversation, and whether Spinella had written anything negative to say about the employer. Spinella was told that because he “liked the disparaging and defamatory comments,” it was “apparent” that Spinella wanted to work somewhere else. Spinella was then discharged.”

In the case there were two instances of employee conduct at issue.

  • Spinella, “Lik[ing]” the post of Ms. LaFrance, which stated “maybe someone should do the owners of Triple Play a favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I OWE money … Wtf!!!!”
  • Sanzone, commenting on the LaFrance post stating “I owe too. Such an a**hole.”

The Triple Play Sports Bar – Legal Decision

The Court and the NLRB both determined that Mr. Spinella and Ms. Sanzone’s conduct on Facebook was concerted activity under Section 7 of the Act, because it involved an “ongoing sequence of discussions that began in the workplace about [the] calculation of employees’ tax withholding.” The Court and the NLRB further determined that the statements were not defamatory, even though profanity was used, because the conversation wasn’t directed at customers and did not relate to the employer’s brand. The Court also determined that the employer violated the Act by (1) threatening employees with discharge for Facebook activity; (2) interrogating employees about their Facebook activity; and (3) informing employees that they were being discharged for their Facebook activity.

In addition, the Court determined that the employer social media policy violated the Act. The employer maintained the following work rule as part of its Internet/Blogging policy in its employee handbook:

The Company supports the free exchange of information and supports camaraderie among its employees. However, when internet blogging, chat room discussions, e-mail, text messages, or other forms of communication extend to employees revealing confidential and proprietary information about the Company, or engaging in inappropriate discussions about the company, management, and/or co-workers, the employee may be violating the law and is subject to disciplinary action, up to and including termination of employment. Please keep in mind that if you communicate regarding any aspect of the Company, you must include a disclaimer that the views you share are yours, and not necessarily the views of the Company. In the event state or federal law precludes this policy, then it is of no force or effect.

The Court determined that “employees would reasonably interpret [this] rule as proscribing any discussions about their terms and conditions of employment deemed ‘inappropriate’ by the employer.”

Takeaways for Employers

  • “Concerted activity” is being interpreted very broadly by the NLRB. Any statements, expressions or shows of support by employees about terms and conditions of employment and/or support for union activities, even if the employer is non-union, should be deemed concerted activity by the employer.
  • Employers must view any social media, including Facebook, as an extension of the workplace. If something is said by an employee on social media that would be protected if it were said in the workplace, it is likely protected on social media.
  • Employers must review and reevaluate their social media policies. Many of these policies were drafted near the beginning of the social media explosion and did not contemplate the assertion of NLRB authority in the social media space.
  • In reviewing social media policies focus on the protection of the employer’s product and/or brand. Statements by employees disparaging or defaming an employer’s product or brand can still lead to the lawful termination of an employee.
  • Realize that many employees under 35 (Gen Xers) complain about everything on social media – work, food, people, TV shows, etc… Whereas an employee currently in their 50s used to complain about their boss or working conditions to others around the water cooler, younger employees do so on social media – social media is their water cooler. Unfortunately, social media provides more publicity to discussions about issues at work, but the NLRB deems social media to be the equivalent of the water cooler. With that said, the torts of defamation, tortious interference, and invasion of privacy still provide some protection to the employer.

For more information about employment law, feel free to contact James B. Shrimp at (610) 275-0700 or by email at

Visit the firm’s Employment Law page.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.