non compete agreement employment law high swartz

Non-compete 101

Over the course of your professional career, you may have been required to sign a non-compete agreement, and if you haven’t yet, then now is a good time to learn about these somewhat common and important documents.  Oftentimes you will be presented with a non-compete agreement when you are starting a new job or have gotten the  raise you’ve been waiting for.  Because these are highly exciting times the temptation may be there to just skim the pages without  really paying attention to the details or restrictions. After all, the non-compete only applies after you leave this job, and at the moment of signing you are likely perfectly happy with where you are professionally.  It is only later on, when you are contacted by a headhunter or just ready for a change, that you begin to worry about the implications of having signed that agreement.

As an initial matter, a non-compete agreement—not to be confused with a garden leave agreement—is an agreement you sign that proactively limits your ability to work in an particular field or industry for a specific period of time in a certain geographic region after you leave your current employment.  Pennsylvania does not have any general statue or regulation governing non-compete agreements.  That being said, there is plenty of case law that guides interpreting, understanding, and enforcing non-competes.  Because Pennsylvania courts disfavor tools used to restrain trade, non-compete agreements tend to be strictly construed against an employer who is seeking enforcement.  Accordingly the courts will only enforce a  non-compete agreement that is 1) incidental to an employment relationship between the parties; 2) reasonably necessary to protect the employer; and 3) reasonably limited in duration and geographic extent.

Just like any other contract, a non-compete agreement must be supported by sufficient consideration.  This is often accomplished by having an employee sign such an agreement before or at the time they commence employment.  Accordingly, make sure you look for a non-compete in the packet of papers you get on your first day.  After you begin work, the consideration required can take the shape of either an increase in pay  or some beneficial change in the employee’s status (Telling a current employee to “sign or get out” is not sufficient consideration in Pennsylvania).

Once you satisfy yourself that consideration exists, you will next want to look at the actual terms of the agreement. Since every non-compete agreement is unique, the analysis of terms will be highly fact specific, but  there are some rules of thumb to keep in mind.  Pennsylvania courts have usually upheld restrictions that are for durations of one to three years.  As far as geographic scope, Pennsylvania courts look to the scope of the employee’s duties in defining a reasonable territorial limitation.  For example if your position is sales related in a relatively defined territory, a non-compete  would likely be held to be reasonable if it prohibited you from selling a competitor’s product or service in that territory.

A Pennsylvania court may, in its discretion, modify the terms of the agreement to a more reasonable scope or duration if it determines that is the more appropriate course of action. But some non-competes are so overbroad and improper that a court may nullify the non-compete entirely if an employee challenges the agreement.

Ultimately, because each non-compete agreement is specific to the employer and its business as well as the employee’s position, interpreting and determining their enforceability can be a daunting task.  If you are concerned about a non-compete agreement that you have signed or have been asked to sign, it is wise to seek advice from an experienced attorney who can help you to most effectively navigate this issue.

If you have any questions about employee agreements or employment issues, please contact us at 610-275-0700 or main@highswartz.com.  Our employment law attorneys provide clients throughout the Pennsylvania region, including Bucks County, Montgomery County, Delaware County, Philadelphia and Chester County with sound advice and excellent representation. Our employment law attorneys deal with workplace issues in an ever-changing environment, we counsel and serve employers on general employment policies, we also handle individual employment matters.

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.

 

Leave a Reply

Your email address will not be published.

Contact Us