As a general proposition, non-compete agreements are disfavored by the courts in Pennsylvania. They are seen as a restraint on trade and courts recognize how onerous it is to restrain an individual from earning a living in their chosen career. It is recognized that absent a compelling reason, persons should not be restricted in their ability to earn a living. Further, at the time most of these agreements are signed they are drafted by the employer and not fully explained to the employee.
Regardless, employers are increasingly adding these agreements as a condition of employment, even in positions where they are clearly not appropriate. In analyzing the enforceability of such agreements, the first question is always going to be whether the employer has a legitimate business interest that requires such an extreme remedy. “The presence of a legitimate, protectable business interest is a threshold requirement for an enforceable restrictive covenant.” Hess v. Gebhard & Co. Inc., 808 A.2d 912, 920 (Pa. 2002). Legitimate business interests can be trade secrets, confidential information, or knowledge of clients' information that is not otherwise ascertainable. There must be real evidence of these business interests and not just vague assertions. That said, courts also recognize that “post-employment non-competition covenants are not per se unreasonable or unenforceable.” Wellspan Health v. Bayliss, 869 A.2d 990, 996 (Pa. Super. 2005). Assuming that burden is met, the court will look next to the burden on the employee under the terms of the agreement. The court will look at how broad and burdensome the terms of the agreement are to the employee seeking new employment. They will look at whether or not there was adequate consideration offered at the time of signing. They will like at how reasonable the agreement is in terms of time frame and geography. The Court will also examine the manner of separation, whether it was a termination or resignation. Finally, there can be other considerations, such as the sale of the business or assignment to a new employer.
It is always the responsibility of the employer to seek enforcement of the agreement. The process can be expensive and the courts do not favor such agreements, so the employer does not always seek enforcement. This is especially true if the departing employee can provide assurances to the employer that their business interests remain protected. A person's profession and career are major interests, and well worth protecting from employers who may be waiving a non-compete agreement that is meritless and otherwise unenforceable.
Our office provides consultations for employees to have their agreements and the facts of their cases evaluated for validity and strength of the positions. If you are anticipating an issue with a non-compete agreement, it is highly recommended you consult an attorney early in the process.
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