Business owners know firsthand what it takes to build up, sustain, and grow a successful business. Among the many things that go into this, putting legal protections in place to shield the business from potential threats can be essential. This is why restrictive covenants, such as non-compete agreements, have become integrated into the business landscape. While non-compete agreements can serve legitimate business interests, they are also viewed with trepidation as they are a restraint on an employee’s ability to seek employment after their relationship with an employer has ended. Such restraint on trade is not taken lightly and not all non-compete agreements in Pennsylvania will be enforceable as some will be seen as unreasonable or overreaching.
Enforceability of Non-Compete Agreements in Pennsylvania
A non-compete agreement is an agreement between an employer and an employee that places restrictions on the ability of an employee to compete with their former employer’s business after they leave company. The most common reasons asserted in support of non-compete agreements is that employers have a valid interest in protecting the goodwill of their customer base as well as any proprietary information an employee may have access to. Employers do not want a former employee to use their resources to set up shop for themselves nearby and with the benefit of information and clients gleaned from their former employer.
Despite the fact that there can be legitimate business reasons for establishing a non-compete agreement, the fact that such restrictive covenants act as a restraint on trade is a serious concern for many, the courts included. To balance the business interests with the restraint on trade issue, Pennsylvania courts have placed limits on the enforceability of non-compete agreements.
For instance, a non-compete agreement must be reasonably limited in both time and place. The time and geographic scope of the agreement must be reasonable in relation to the business interests they are legitimately trying to protect. The durational and geographical limits included in the non-compete agreement must balance the business circumstances with the ability of a departing employee to be able to seek and retain gainful employment. The restrictions on geography cannot be overly broad nor can the durational time frame covered by the agreement as they would not serve a legitimate business purpose and they would be unduly burdensome.
Business Law Attorneys
Restrictive covenants such as non-compete agreements can be a critical part of protecting your business interests. In order to be effective and enforceable, however, they must be carefully crafted according to the limits imposed upon them by the state’s courts. The business law team at Jones, Gregg, Creehan & Gerace can draft strong, comprehensive agreements for you that protect your business and remain in compliance with state law. For all of your business law needs, you can count on us. Do not hesitate to reach out to us for assistance. Contact us today.