Center City Non-Compete Agreement Lawyers

It is a common practice for employers to require employees to sign a non-compete agreement upon being hired. Also referred to as restrictive covenants, non-compete agreements are contracts between an employer and an employee that state that the newly hired employee may not work for a competitor or start a competing business for a specified period of time after leaving their current job. Businesses use these contracts to protect their business interests and client relationships and maintain a competitive edge in the industry. However, for a non-compete agreement to be enforceable, it must be reasonable in duration, geographic scope, and the necessity to protect legitimate business interests.

If you have questions or concerns about a non-compete agreement, including whether you are legally required to sign one, and the impact it could have on your career, it is highly recommended that you contact the Center City non-compete agreement lawyers at The Gold Law Firm P.C. at your earliest convenience.

What Is a Non-Compete Agreement?

A non-compete agreement is a contract designed to prevent you from taking the proprietary information you learned in your current job and sharing it with a new employer who shares the same business interests or launching your own business by implementing the training and tools you learned at your previous job. Non-compete agreements are generally in effect for a specified period based on state laws.

For example, if you work in Pennsylvania, your non-compete agreement may state that you cannot work for a competitor in Pennsylvania for up to one year after leaving your job. This can hurt your future employment opportunities.

Are Non-Compete Agreements Enforceable in Pennsylvania?

Non-compete agreements are enforceable in Philadelphia and across Pennsylvania. However, several principles have developed as part of Pennsylvania case law that determine whether non-compete agreements are enforceable, including the following:

Protection of a Legitimate Business Interest: Your employer cannot enforce a non-compete agreement simply to eliminate competition. They must establish a legitimate business interest that they seek to protect, such as trade secrets, customer relationships, or specialized training.
Consideration for Signing the Agreement: For a non-compete agreement to be enforceable, consideration must be exchanged for its execution. This means you must receive something in return for signing the agreement. This can include a higher salary, a promotion, a bonus, or continued employment. In some cases, continuation of employment may serve as a valid consideration.
Termination of Employment or Voluntary Departure: A non-compete agreement may be enforceable if you are terminated or leave your job voluntarily. Even if you were fired without cause, a non-compete agreement may still be enforceable unless the agreement is considered unreasonable in time or geographic scope or the reason for termination invalidates the agreement. Pennsylvania courts may scrutinize non-competes more heavily when the employee is terminated without cause.
Assignment to a New Employer: A non-compete agreement is typically confined to the employer who drafted the agreement in Pennsylvania. The agreement is not automatically assignable to a new employer unless the original non-compete agreement specifically allows for such a transfer.
Non-Compete Agreements Incident to the Sale of a Business: Non-compete agreements in the context of the sale of a business are treated differently by the court and are more likely to be enforceable than other non-compete agreements. These are often deemed necessary to protect the value of the business being sold.

What Are the Limits of a Non-Compete Agreement?

A non-compete agreement that includes the following limits is more likely to be enforceable in court:

Length of Time: A non-compete agreement with a limited duration is more likely to be enforced. For example, an agreement that expires six months to one year after the employment relationship ends is more likely to be enforced than one with no end date, which could be burdensome for the employee.
Geographic Area: A non-compete agreement must cover a reasonable area. What is considered “reasonable” depends on the employee’s job and the employer’s business needs. For example, a highly specialized job may restrict employment within a state or region, while for other positions, it may be reasonable to restrict employment within a specific distance. It is generally unreasonable to prohibit employment with a competitor anywhere in the country or the world.
Definition of “Competitor”: A non-compete agreement needs to clearly define who qualifies as a competitor. At a minimum, it should identify the industry and types of businesses it covers.
Definition of “Competition”: The agreement should also describe the types of work that are considered competitive. It cannot prohibit work unrelated to the employer’s business interests or trade secrets.
Damages for Breach: The non-compete agreement should include detailed information about the consequences of breaching the agreement. Damages may include an injunction (a court order requiring specific action) as well as monetary damages, including compensatory, punitive, liquidated, and court and attorney fees.

Do I Have to Sign a Non-Compete Agreement?

A non-compete agreement is a legal contract. Once you sign the agreement, you give up certain rights, so it is understandable if you are hesitant to sign it. If your employer has asked you to sign a non-compete agreement and has made it clear that it is non-negotiable, you may have limited ability to avoid signing it. However, you may have the opportunity to review the agreement and make a counteroffer to clarify certain details and reduce the scope of the agreement. When negotiating the terms of the non-compete agreement, consider the following:

The agreement should include a detailed description of who or what constitutes a competitor.
The agreement should specify the types of work that may be considered competition.
You should receive additional compensation for agreeing not to compete, especially if the terms significantly restrict your future employment opportunities.
The non-compete is only enforceable if you leave your job voluntarily or under certain conditions if you are terminated without cause.

What Is the Difference Between Non-Compete Agreements and Nondisclosure Agreements?

While business owners use both non-compete agreements and nondisclosure agreements (NDAs) to protect their interests, there are key differences between the two:

Non-Compete Agreement: Prevents former employees from competing with the employer after leaving their job for a new position at a different company.
Nondisclosure Agreement (NDA): Prevents employees from sharing confidential information, such as customer lists or trade secrets, with others. NDAs do not restrict an employee’s ability to work for a competitor. NDAs may be easier to enforce because they do not limit an employee’s job mobility. In some cases, NDAs are preferred over non-compete agreements because they are more narrowly focused on protecting proprietary information.

What Other Methods Do Employers Use to Protect Proprietary Information?

In addition to non-compete agreements and NDAs, employers often use the following methods to protect their interests:

Non-Solicitation Agreements: Legally binding contracts that prevent employees from contacting the employer’s customers or employees after leaving the company.
Restrictive Covenants: Agreements between an employer and employee that protect the employer’s business interests, including trade secrets, investments in employee training, and customer goodwill. Non-solicitation agreements and non-compete agreements are both types of restrictive covenants.