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When is a Non-Compete Not Enforceable

Non-compete employment law attorneys provide assistance with legal issues relating to non-compete agreements. Non-compete agreements are necessary across many industries to prevent employees from taking client information or trade secrets and using their knowledge to hurt the business of their former employer. However, a non-compete is also a restraint on trade and can impact the ability of an employee to make a living, so enforcement of these contracts is not always guaranteed. 

Employers need to talk with non-compete employment law attorneys to draft an enforceable agreement and to take action if an employee is violating a non-compete contract. Employees should also work with an attorney before signing a non-compete to make certain their rights are protected, and should talk with a lawyer if they believe a non-compete agreement an employer is trying to hold them to is overly broad. Curley & Rothman, LLC represents both employers and employees so give us a call to get help with legal issues related to non-compete agreements.

When is a Non-Compete Agreement Not Enforceable?

A non-compete agreement is enforceable in Pennsylvania only when certain conditions are satisfied. The conditions which must exist in order for a non-compete to be enforced include the following:

  • There must be consideration.

The consideration requirement means that something of value must be given to an employee in exchange for signing a non-compete agreement. This cannot just be token consideration, like continued employment or a small raise that the employee would have gotten anyway. However, in a case called Davis v. Warde, Inc. v. Tripodi, the PA Supreme Court held that offering a combination of benefits could be sufficient consideration for a non-compete to be valid, even if each individual new benefit would by itself not be enough to constitute adequate consideration.

  • The non-compete must be limited in time, place, and scope.

A non-compete will not be enforced if it is overly broad and would effectively prevent an employee from working in his chosen field. A few key factors are used by the court to determine if an agreement is sufficiently limited so as to be enforceable.

The court will consider the time duration for which the employee is restricted from competing. Typically, if the limitation on competition is for a year or less, it is more likely to be enforced than if an agreement is for a longer duration. If the limitation lasts for more than five year, on the other hand, it is unlikely to be enforceable except in special circumstances.

The court will also consider the geographic cope of the agreement and the extent of services that the employee is prohibited from performing. If the contract restricts an employee from doing too many different kinds of work, lasts for a very long time, or covers a very wide geographic area, then the court is likely to consider the non-compete to be too broad and thus an unlawful restrictive covenant that it will not enforce.

The decision on whether a non-compete is sufficiently limited is going to be made on a case-by-case basis considering the unique facts and circumstances of each individual situation. For example, the court is usually willing to enforce more broad non-compete agreements in situations where a company owner has sold a business and is prevented from competing, compared with situations where a worker has simply decided to leave a current employer and move on.

In every case, when the court is assessing whether a non-compete is valid or not, the court’s main goal is to determine if the non-compete agreement is reasonable to protect the legitimate business interests of a company and whether the agreement is so restrictive as to be an unfair limitation on the ability of an employee to earn a living in his or her chosen field.

Getting Help from Non-Compete Employment Law Attorneys

Curley & Rothman, LLC has provided help to many employers in drafting enforceable non-compete agreements that will hold up in court and provide expected protections. We have also assisted many businesses in taking legal action in situations where employees are acting in violation of a non-compete.

Our legal team represents not just employers, but also workers as well, so you can give us a call if you need help negotiating the terms of a non-compete or determining if a contract is enforceable or not.

The stakes are high when it comes to protecting your company’s secrets or preserving your ability to make a living. Let Philadelphia non-compete employment law attorneys provide the legal advice you need to make smart choices. Give us a call at 610-834-8819 or contact us to get help today with non-competes.

Employment LawScott Rothman