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Lauri Kavulich, Clark Hill

A bill has been quietly sitting in the Pennsylvania House Committee on Labor and Industry that would outlaw covenants not to compete in the commonwealth except for very narrow exceptions. House Bill Number 1938, co-sponsored by Democrats Tom Caltagirone, Anthony DeLuca, Mike Driscoll and Republican David Zimmerman titled the “Freedom to Work” Act, would render covenants not to compete illegal, unenforceable and void except for a few exceptions such as the sale of a business, dissolution of a partnership (or the dissociation of a partner), and a covenant that was in effect prior to the effective date of the bill.

In the memorandum to fellow representatives regarding the bill, Rep. Caltagirone cites the improving economy and unemployment rate, stating that removing the restrictions on mobility in the workforce would allow employees with “in demand” skills to take better paying jobs and stay in Pennsylvania, since they do not have to find positions outside the geographic area covered by the noncompete agreement. He also states that the “indentured servitude system” of noncompete agreements hurts small businesses and prevents them from hiring the best and brightest because they cannot afford to pay an employee during the period of the noncompete agreement. See Memorandum of Rep. Thomas R. Caltagirone dated March 22, 2017, regarding “Prospective Ban on Restrictive Covenants in Employment Agreements.”

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