Contracts that keep employees from starting a business similar to yours or from working for competitors within a certain time frame and geographic area after leaving their current job are non-compete agreements. Employers use these agreements to protect their business interests. In Pennsylvania, non-compete agreements are enforceable, but they must meet specific legal criteria to be valid.
The agreement should not impose undue hardship on the employee or be overly restrictive. Courts balance the interests of both the employer and the employee. Additionally, the employee must receive something of value in exchange for agreeing to the restrictions. This could be a job offer, a promotion, or some other benefit.
Reasonableness of the agreement
Non-compete agreements must protect a legitimate business interest. This includes protection of trade secrets, confidential information, or specialized training provided to the employee. If the agreement is too broad or not necessary to protect these interests, it may not be enforceable. For example, an agreement that restricts an employee from working in an entire industry for several years is likely considered unreasonable and invalid.
Geographic scope
Courts also evaluate the reasonableness of the geographic scope of non-compete agreements. The restricted area should be limited to where the employer conducts business or where the employee has a significant impact. An agreement that covers an excessively large area may be considered unreasonable.
Modifying overly broad agreements
In some cases, courts may modify overly broad non-compete agreements to make them enforceable rather than voiding them entirely. This process, known as “blue penciling,” allows the court to strike out unreasonable portions of the agreement while enforcing the rest. However, not all courts are willing to modify these agreements, and the outcome can vary depending on the specific circumstances of each case.
Ensuring fair non-compete agreements
Non-compete agreements are enforceable, but they must meet certain criteria to be valid. Staying informed about any changes in state laws and court rulings can aid employers in maintaining compliant and effective non-compete agreements. This proactive approach not only safeguards the employer’s interests but also fosters a fair working environment for employees.
