Can My Pennsylvania Employer Enforce a Non-Compete Agreement?

A non-compete agreement is a legal contract that prevents an employee from competing with their employer during and after their employment. They are controversial because of the restrictions they impose on the employee’s economic freedom. Many business owners, however, see them as necessary in certain industries, such as software engineering.

What Activities Do Non-Compete Agreements Restrict?

A non-compete agreement might prohibit or restrict some or all of the following activities:

  • Working for your former employer’s competitors after you and your former employer part ways;
  • Soliciting your former employer’s staff to “jump ship” and work for your new startup instead;
  • Soliciting your former employer’s clients to do business with your new company instead of your former employer; or
  • Using your former employer’s trade secrets or other confidential information to compete with them.

Pennsylvania courts are generally suspicious of non-compete agreements, but they will enforce them if they meet certain conditions.

Under What Circumstances Will a Pennsylvania Court Enforce a Non-Compete Agreement? 

There is no guarantee that a Pennsylvania court will enforce a non-compete agreement. A court will consider the following factors and apply a balancing test:

  • The geographic scope of the restrictions;
  • The time duration of the restrictions;
  • Whether the employer can demonstrate a strong business need for the restrictions;
  • The overall economic burden that the agreement places on the employee; and
  • Whether the employee quit or was fired (this is not dispositive, but courts are more reluctant to enforce a non-compete if the employee was terminated without cause).

An employer cannot simply impose a non-compete agreement against an employee by fiat. They must offer something in return. If the employee has not yet been hired, that “something” can be the job itself (“If you want this job, you must sign the non-compete agreement.”). 

If the employee has already been hired, that “something” might be something like a raise or lump-sum payment. A non-compete agreement can be part of an initial employment contract, or it can be a standalone document.

“Blue Penciling”

“Blue penciling is a court practice that modifies a non-compete agreement without voiding it entirely. Suppose, for example, that an employer sues a former employee on a non-compete agreement that prevents the employee from working for the employer’s competitors for five years after leaving the company. 

If the court thinks five years is too long, they don’t have to void the entire contract. They can “blue pencil” five years down to, say, three years and enforce it that way.

Emergency Injunctions

Suppose that a disgruntled employee, privy to many of their employer’s trade secrets and their intellectual property (such as algorithms), quits their job as a software engineer and takes another one with the employee’s direct local competitor. The employee arrives at the competitor’s office with a laptop that the employer believes contains a multitude of proprietary information belonging to the former employer.

Upon application by the employer, a Pennsylvania court can issue an emergency injunction to prevent harmful and unfair behavior by the former employee. This injunction is only temporary until there is an opportunity to hold a full adversarial hearing to determine whether to make the injunction permanent. 

The employer must prove the following facts to qualify for a temporary injunction:

  • A high likelihood of success in their subsequent application for a permanent injunction;
  • The non-compete agreement is valid and enforceable under Pennsylvania law;
  • The employer will suffer irreparable harm without an immediate temporary injunction;
  • The potential harm to the employer outweighs any harm that the former employee will suffer from enforcement of the non-compete agreement; and
  • Granting the injunction serves the public interest.

The employer must attempt to notify the employee in advance of the application for an injunction. The court may require the employer to post a bond to cover any damages caused by the potentially unfair issuance of the temporary injunction.

An experienced Pennsylvania employment lawyer can help you understand how non-compete agreements work. They can also explore your options if your employer or former employer is trying to enforce a non-compete agreement against you, whether you are an employer or an employee. If your case is strong, chances are good that you can find an attorney willing to take your cause.

Contact Marzzacco Niven & Associates at the nearest location to schedule a free consultation today:

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(717) 231-1640

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