Pennsylvania Non-Compete Agreement | Laws

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Updated June 02, 2022

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. 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.

Source: Sidco Paper Company v. Aaron (1976)

Balance Test

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

“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.”

Source: Hess v. Gebhard & Co. Inc. (2002)

Continued Employment

A promise of continued employment is not sufficient consideration for an employee to enter into a non-compete. (George W. Kistler, Inc. v. O’Brien (1975))

However, if the employee gets a “corresponding benefit or change in status,” the non-compete will be determined to have sufficient consideration. (Maint. Specialties, Inc. v. Gottus (1974))

Attorneys (prohibited)

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

Source: Rule 5.6 (Restrictions on Right to Practice)

Maximum Term

Geographic Limitation

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

Source: WellSpan Health v. Bayliss (2005)

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.”

Source: Sidco Paper Company v. Aaron (1976)