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Pennsylvania Non-Compete Agreement Template

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Pennsylvania Non-Compete Agreement Template

Updated February 27, 2024

A Pennsylvania non-compete agreement is legal to protect the employer’s business interests for a specific time period and geographic extent. A non-compete must balance safeguarding an employer’s legitimate business and an employee’s claim to earn a living.

Legally Enforceable?

Yes, a non-compete is legally enforceable if it meets the Supreme Court requirements:[1]

  1. Where they are incident to an employment relationship between the parties to the covenant;
  2. The restrictions are reasonably necessary for the protection of the employer; and
  3. The restrictions are reasonably limited in duration and geographic extent.

Balance Test

To determine whether or not a non-compete a reasonable, a court will apply the “balance test” as described:[2]

“In determining whether to enforce a non-competition covenant, this Court requires the application of a balancing test whereby the court balances the employer’s protectible business interests against the interest of the employee in earning a living in his or her chosen profession, trade or occupation, and then balances the result against the interest of the public.”

Continued Employment

A promise of continued employment is not sufficient consideration for an employee to enter into a non-compete.[3]

However, if the employee gets a “corresponding benefit or change in status,” the non-compete will be determined to have sufficient consideration.[4]

Attorneys (prohibited)

An attorney is prohibited from entering into a non-compete or any covenant that restricts their right to practice law.[5]

Maximum Term

  • Employment: 2 years has been deemed reasonable.[1]
  • Sale of a Business: 5 years has been deemed reasonable.[2]

Geographic Limitation

Any area where a business does not serve is “unreasonable and hence unenforceable.”[6]

Blue Penciling

A court can modify a non-compete if it doesn’t provide “an intent to oppress the employee and/or to foster a monopoly.”[1]

Sources