Non-Competition Agreements: The Devil’s In The Details

Employment / Personal Injury / Business

Employers are resorting to use of non-competition agreements more frequently.  The attempt to prevent an employee from not only leaving with business, but working for a competitor, is on the rise even in businesses where it has not been common practice before such as beauty salons and doctors’ offices.  Unless a court finds the terms of the agreement are overly restrictive, non-competition agreements are enforceable. In Pulse Techs, Inc. v. Notaro, the Pennsylvania Supreme Court recently reaffirmed its willingness to enforce a non-competition agreement when the employee signed the agreement upon hire.  Employees anxious to have a job may unfortunately sign whatever the employer asks them to at the time of hiring and do not find out until much later the unanticipated consequences.

Employees should always seek an attorney’s advice before signing any legal document.  If you have the opportunity to negotiate the terms of the non-competition agreement, here are some ways to protect yourself:

1.  If they don’t want you to work elsewhere, ask them to continue your pay for the restrictive period or until the employer chooses to release you from the obligation.  Unfortunately, only employees who bring considerable value to the employer will have the leverage to negotiate for this term.

2.  Define what it means to “compete” as narrowly as possible.  For example, many companies have more than one product line.  If the employee worked only on one product, the employee should not be prevented from going to work for a competitor on an entirely different product.  If competition is undefined in the agreement, you can be sure the employer will interpret it as broadly as possible.

3.  Limit the time and geography of the restrictive period.  Non-competition agreements up to two years and with reasonable geographic limitations generally do not draw a court’s disapproval. However, in Lucciotti v. American Management Advisors, Inc., a decision out of Bucks County, PA, the court held that restricting the employee from working for a competitor anywhere in the United States for two years was unreasonable.  The court noted the employee brought with him to the employment many clients from around the country.  Employees should think about who they could go to work for, and where, if the job ends within the restrictions of the agreement the employer is asking them to sign.

Courts will address the reasonableness of a non-competition agreement on a case-by-case basis.  It will involve an examination of the employee’s job and skills and the nature of the employer’s business.  A small, local company will not be able to impose the same restrictions as a globally competitive corporation.  In the end, it may be more beneficial to seek employment elsewhere than to work for an employer who can end your employment at any time and severely restrict your ability to find new employment elsewhere.

If you have a legal matter, please call our Yardley office at 215-493-8287 or send us an email HERE.  We will be glad to help.

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