How do non-competition clauses in employment contracts work in Pennsylvania?

Pennsylvania courts will enforce non-competition clauses in employment agreements under some circumstances, but generally not unless it appears the employee deliberately acted to provoke the termination of employment.

These clauses are subject to close judicial scrutiny. If the Court believes that the employee purposely neglected his duties so that the employer would terminate the employee, the Court is likely to enforce the non-competition agreement, provided it is reasonable in geographic scope and limited to a reasonable period of time. In most cases, if you are fired, the court will not enforce a non-competition clause in an agreement.

If your agreement was signed two weeks after you started your job, for example, the agreement may not be considered legally valid and the court may not enforce it. Whether or not the non-compete agreement is legally valid depends on the circumstances at the time you signed the agreement.

One of the reasons a non-competition covenant may not be enforced by the courts deals with adequate consideration. This boils down to what the employee gets out of it. If the employee doesn’t obtain any benefit from signing, then the agreement isn’t going to be considered legally valid. As such, unless you received something for signing that agreement two weeks after you started, your employer probably isn’t going to be able to enforce it.

Generally, a non-competition clause is signed when you take a job in the first place, so getting the job is sufficient consideration. If you are already employed, however, the employer must provide some additional benefits to you for signing. This could be a promotion, a pay raise, change in status or responsibilities, a bonus, a severance package, or other things. However, a small token raise or benefit would not be sufficient because the additional benefit needs to be substantial. Other things that may be considered ample consideration would include a permanent job offer after a probationary period.

Further, non-compete agreements are supposed to protect the employer from unfair competition and the employer has a responsibility to make the agreement reasonable in time and scope. This means, the agreement must last for a reasonable amount of time, depending on the industry. The employer can also include details of scope such as a geographic region, but not the whole country, and may limit contact with certain customers. Finally, a non-compete agreement may not be enforced if the employer has used it to try to eliminate all of the competition or to give himself an unfair advantage.

Case Studies: Non-Competition Clauses in Pennsylvania Employment Contracts

Case Study 1: Enforceability Based on Employee’s Conduct 

Alex signed an employment agreement that included a non-competition clause. However, after being terminated from the job, Alex discovered that the employer intended to enforce the clause. In Pennsylvania, courts closely scrutinize non-competition agreements and consider factors such as the employee’s conduct leading to termination. If it appears that the employee deliberately provoked the termination, the court is more likely to enforce the non-competition agreement, provided it meets certain criteria, such as reasonableness in geographic scope and duration.

Case Study 2: Validity of Non-Competition Agreements 

Sarah started a new job and was required to sign a non-competition agreement two weeks into her employment. However, the timing of the agreement raises concerns about its legal validity. In Pennsylvania, the enforceability of a non-competition agreement depends on the circumstances at the time of signing. If an agreement is signed after the employment has already begun, it may not be considered legally valid, and the court may not enforce it.

Case Study 3: Adequate Consideration and Reasonableness 

Mark has been with his employer for several years and was asked to sign a non-competition agreement. In Pennsylvania, a non-competition covenant requires adequate consideration to be enforceable. While joining a new job generally constitutes sufficient consideration, when an employee is already employed, the employer must provide additional benefits in exchange for signing the agreement.