To many businesses, so-called “noncompetition” agreements are essential, particularly where employees or independent contractors will have access to confidential or proprietary business information during the course of their employment. Such agreements help businesses protect goodwill, customer lists and trade secrets, and help to retain key employees—particularly those in whom the business has made a substantial investment. However, business owners in Pennsylvania should take note that if a noncompetition agreement is unlimited in geographic scope or purports to be a “worldwide noncompete,” Pennsylvania courts may find the agreement to be per se absolutely void, and the employee will be able to compete with the employer after her engagement without any geographic restriction.
It is widely known that because noncompetition agreements are disfavored, courts will impose restrictions on the scope of noncompetition agreements. Generally, in Pennsylvania noncompetition agreements are enforceable only if they are ancillary to an employment relationship; supported by adequate consideration, the restrictions are reasonably limited in duration and geographic extent, and the restrictions are designed to protect the legitimate interests of the employer. See Socko v. Mid–Atlantic Systems of CPA, 126 A.3d 1266, 1274 (Pa. 2015). Historically, the appropriate geographic extent of a noncompetition restriction would be determined generally by the scope of the employee’s duties, not the geographic area in which the employer sells its goods or services, as in Boldt Machinery & Tools v. Wallace, 366 A.2d 902, 909 (Pa 1976).
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]