PENNSYLVANIA NON-COMPETE AGREEMENTS

“Although the concept behind a non-compete agreement is simple enough, the details that determine whether or not a non-compete

agreement is actually enforceable are far more complicated.”

Charles Curley Pennsylvania Employment Attorney

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Whether you are an employer or an employee it is likely that you will be a party to

at least one non-compete agreement over the course of your lifetime. Although

the concept behind a non-compete agreement is simple enough, the details that

determine whether or not a non-compete agreement is actually enforceable are

far more complicated. All too often employers include language that makes the

agreement too broad in scope and, therefore, unenforceable. Employees, on the

other hand, frequently sign a non-compete agreement without paying enough

attention to what they are singing, only to realize down the road what they have

given up. Because of the unique nature of any legal agreement it is always best

to have an experienced Pennsylvania employment law attorney review a

prospective non-compete agreement, or NCA, before presenting it to a

prospective employee or executing the agreement.

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What Is a Non-Compete Agreement?

At its most basic, a non-compete agreement attempts to prevent harm from

occurring to an employer by preventing an employee from competing with a

former employer. A non-compete agreement may be no more than a provision

buried within a voluminous employment contract or it may be a separate contract

entirely. Either way, the purpose of an NCA is to protect an employer when the

employer-employee relationship comes to an end. In many cases, an employee

is privy to confidential trade secrets, client lists, and general proprietary

information that could seriously damage the company were the employee to use

and/or disseminate that information after leaving the company.

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The Terms of a Non-Compete Agreement

Although every NCA is unique, there are some common terms and conditions

found in most agreements, including:

Non-disclosure provisions. These provisions prohibit an employee from

disclosing confidential information to competitors. For example, if a

company developed a method for doing something better or faster than

competitors the employee cannot share any details of the method.

Client lists. These provisions forbid an employee from using client contact

information to which the employee was pricy while working for the

company. For instance, if the employee plans to open his/her own

company selling/offering similar products/services the employee cannot

solicit clients using the employer’s client list.

Prohibitions relating to time. These set a time period during which the

employee is forbidden to compete with the employer.

Prohibitions relating to geographic area. These set physical boundary

lines that prevent an employee from competing with the employee within

those lines.

Consideration for Signing a Non-Compete Agreement

The law of contracts holds that for any contract to be enforceable three elements

must be present – an offer, and acceptance, and consideration. The third

element has long been the focus of litigation surrounding NCAs. A non-compete

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agreement may be part of the initial employment contract between a company

and a new employee; however, employers may also ask an employee to agree to

a non-compete agreement after being employed at the company for some time.

Historically, courts typically found that nominal consideration was sufficient

consideration to enforce a non-compete agreement. In 2014 though the Superior

Court of Pennsylvania issued a ruling in Socko v. Mid-Atlantic Systems of CPA,

Inc. holding that a non-compete agreement stating only that the parties "intend to

be legally bound” but providing no new benefit of value or change in job status, is

unenforceable against an existing employee for lack of consideration. This

ruling is important for both employers and employees entering into a NCA when

the employee is already employed by the company.

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Enforceability of a Non-Compete Agreement – Duration and Geography

All too often an employee does not really read through the terms of a non-

compete agreement until after the employer-employee relationship has ended.

Only then does the employee realize the limitations placed on him/her with

regard to future employment. When properly drafted, a non-compete agreement

can be enforceable; however, Pennsylvania courts have consistently declined to

enforce terms in NCAs that are unnecessarily broad, over-inclusive, and/or

unnecessarily restrict an employee’s ability to work after terminating the

relationship with the employer.

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As a general rule, a non-compete agreement must be limited in time and place

for it to be enforceable. The bounds of those limits will depend on several factors,

including:

What the business interest is the employer is trying to protect

The amount of time the protected information retains value

The geographic area in which the employer does business

The employee’s position and with the employer

The employee’s value to the employer

Ultimately, if a court is forced to consider the enforceability of a non-compete

agreement the court must balance the right of an employer to protect a legitimate

business interest against the burden the restrictions place on the employee.

Sometimes, if the court does find the NCA to be overly broad in scope and/or

duration the court may modify the terms of the agreement to narrow either the

geographic area and/or the duration and allow enforceability of the agreement as

modified.

Does a Non-Compete Agreement Survive Termination?

One issue that frequently comes up with non-compete agreements is whether or

not the agreement survives the termination of the employee. Employees are

often under the impression that the agreement is void if the employee is

terminated by the employer. Typically, that is precisely when an employer

expects to be able to enforce a NCA though. An NCA is clearly enforceable if the

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employee was terminated for cause. An employee may, however, have a valid

argument against enforcement of the NCA if the employee was terminated

without cause. The argument can be made that if the employee was valuable

enough to warrant enforcing a non-compete agreement after termination, why

was the employee let go without cause in the first place? Unfortunately, there is

no universal answer to this dilemma though. Not only are the specific facts of the

termination a controlling factor, but not all courts have handled this issue the

same, meaning there is no

“bright line” answer to

whether or not a NCA is

enforceable when an

employee is terminated

without cause.

As you can see, the laws

relating to non-compete

agreements in

Pennsylvania are complex and every-changing. Whether you are an employer

drafting a non-compete agreement or an employee faced with signing one the

advice and counsel of an experienced Pennsylvania business law attorney will be

invaluable.

Findlaw, Non-Competition Agreements: Overview

Inside Counsel, Factors Affecting the Enforceability of Non-Compete Agreements

Inc., The Case Against Non-Compete Agreements

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About Curley & Rothman, LLC

Curley & Rothman, LLC is a boutique firm of

commercial lawyers serving clients ranging from

individuals to Fortune 500 corporations in

Pennsylvania and New Jersey. We provide

clients with experienced, skilled, and honest

advice and representation in commercial and

business-related legal matters. Our mantra is

"Relentless Representation" and we hold to it.

We are determined to do everything possible to

provide you with the competitive edge you need to win.

At the Conshohocken law firm of Curley & Rothman, LLC, we understand your time and

resources are valuable, so we will not waste them by agreeing to represent you in a case in

which you cannot prevail. If we agree to take your case, it is because we are confident we can

come up with winning strategies for you. Contact us now by calling 610-834-8819 to schedule

your free consultation today.

Spring Mill Corporate Center

1100 East Hector Street

Suite 425, Conshohocken, PA 19428

www.curleyrothman.com

Phone: 610-834-8819

Fax: 610-834-8813