Employers may seek noncompetition agreements to prevent former employees or independent contractors from taking confidential information, trade secrets or customers. When asked to sign an employment contract containing a noncompetition clause, employees should consider whether these clauses are invalid.
Non-compete clauses are usually viewed unfavorable by courts. Generally, courts will enforce non-compete clauses only if the agreement is integrally associated with a worker's employment, each party receives an inducement and gives up something in return, any time or geographic restrictions are reasonable, and the restrictions are designed to protect the employer's valid interests.
Agreements that have unlimited geographic restrictions, such as a worldwide noncompetition, are usually unenforceable. Appropriate geographic restrictions should be based upon the extent of the employee's duties and not where the employer sells its goods or services.
Previously, Pennsylvania courts would enforce non-competition agreements if any invalid provisions could be invalidated. In the last few years, however, courts have struck down entire agreements with unlimited geographic restrictions unrelated to the employer's territory. Federal courts in Pennsylvania may take a slightly different view. Considering the new information age and worldwide commerce, federal courts have found that a general prohibition against broad geographical restrictions is outdated.
Federal courts and some state courts will review the entire noncompetition agreement with broad geographic restrictions. In one case, for example, a federal court upheld a worldwide geographic ban because the former employee was restricted from working for only nine competitors.
Other unlimited restrictions may also be enforced in certain circumstances. In one federal case, an unlimited agreement was enforced because it applied only to the former employee's previous sales territory.
An attorney can help negotiate these agreements. In addition to eliminating invalid terms, a lawyer may be able to help remove terms that harm an employee's finances or professional future. Legal representation may also protect a workers' rights when an employer tries to enforce unreasonable terms in these agreements.