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Frequently Asked Questions

What is a Non-compete?

A non-compete agreement (or noncompete clause) is a binding employment contract that allows a court to limit a worker from competing with the employer for a certain amount of time and within a particular geographic area.   

 

What is the Purpose of a Noncompete?

Non-compete clauses serve two primary functions for employers: they deter key employees from leaving to work for a competitor and prevent the sharing of valuable training, trade secrets, and other proprietary information with competitors. From an employer's perspective, non-competes foster a sense of security, encouraging them to invest in training and development knowing that their employees will remain loyal even after their employment ends.

 

How Do Courts View Noncompete Agreements?

While noncompete agreements are legal in most states, including Pennsylvania, a judge will only enforce one if it is reasonable in both time and scope, and if enforcement is deemed fair to protect the employer's business. It's important to remember that there is a strong public policy in favor of allowing individuals to earn a livelihood.

Furthermore, employers have other legal tools at their disposal to protect their business interests without restricting an employee's ability to earn a living. These include:

• • Trade secret protection (e.g., preventing an employee from sharing a customer list, formula, practice, recipe, or design)
  • Non-Disclosure Agreements (NDAs) (preventing an employee from sharing confidential information learned on the job)
  • Non-Solicitation Clauses (preventing an employee from encouraging customers or other employees to leave the company)

But in certain cases, if the employee who signed the noncompete holds a high-level position within the company and their employment with a competitor could jeopardize the current employer's business, the courts may balance the interests of both parties and potentially enforce the noncompete agreement.

 

What Legal Services Do You Offer? 

Our normal hourly rate is $250 per hour.  However, we charge only a reasonable flat fee of only $200 to review your noncompete. For this fee, we: 

• Talk to you about your options;   
• Discuss with you the risks of working for a competitor, and, 
• Help you make informed decisions. For example, should you tell your current employer you're going to work for a competitor? Is new new position truly in "competition" with the prior current/employer?  Do you tell tell the new employer about the noncompete? Will the new employer agree to defend you, or terminate you instead? 

 

What Must an Employer Prove To Enforce a Non-Compete? 

In court, the employer must prove: 

1. 1. The employer has a protectable interest in certain business  activity;
   2. The geographic restraint of competition is reasonable; for example, a trial court enforced a non-compete against an accountant, and the superior court in part but remanded given the non-compete had been enforced with an unlimited geographic area of application.  See the non-precedential opinion:  PFB MEMBERS' SERVICE,  CORPORATION v. ECKENROAD, Pa: Superior Court 2020, No. 801 MDA 2019.
   3. Time period of the restraint is reasonable.
   4. The absence of an undue hardship on the employee.
   5. The employer paid good and valuable consideration for the  non-compete clause.

Most importantly, the court will balance the employer's protectable interest against the burden of enforcement on the employee or former employee.

 

What Are the Defenses to a Noncompete?  

Overall, covenants in restraint of business activity are not favored, will  be strictly and narrowly construed, and in the event of an ambiguity, will be construed in favor of the worker. Hess v. Gebhard & Co. Inc., 808 A. 2d 912 - Pa: Supreme Court 2002.

A. Consideration is Key

Here in PA, the courts look at whether the employee enjoyed a beneficial change in status (consideration) contemporaneous with the non-compete. Recently, in Rullex Co. v. Tel-Stream, Inc., No. 27 EAP 2019 (Pa. 2020), the Pennsylvania Supreme Court  opined that "fresh consideration" is needed to show an objective "meeting of the minds" (a mutual understanding as to agreement), which can be inferred from the surrounding circumstances.  

B. Termination of the Employee

The employer -- who has no room in its organization for an employee -- will have a hard time explaining to a judge why that employee is too "valuable" to let work for a competitor.  

 

When is Enforcement Likely?

It is the employer's  burden to prove that the restraint sought is no greater than necessary to protect a legitimate business interest. Roanoke Engineering Sales Co., Inc. v. Rosenbaum, 223 Va.548, 552, 290 S.E.2d 882, 884 (1982). But this burden is easily met in certain situations: 

High Level Employee or Officer 

Courts are inclined to enforce a noncompete against an officer, manager, or other person with special knowledge about how to set the company apart from others.  This includes policy makers and those with intimate knowledge about what gives a business its special edge. 

A Non-Compete Worded as a Carrot Versus Stick 

It's always OK for an employer to delay a severance package or other inventive, conditioned on the employer remaining loyal.  So, for example, if the noncompete stops short of prohibiting future work, but instead rewards the employee for not competing, then it will almost certainly be enforced.    

Sale of a Business

A person selling a business may agree to refrain from competing with the business he sold.  This is enforceable, because the seller is presumed to have adequate bargaining leverage when agreeing to refrain from competition.  Importantly, however, from the employee's point of view, his noncompete with one employer cannot be assigned to another. This is because the employee pledged loyalty to the first business, but not its assignee. See Hess v. Gebhard & Co. Inc., 808 A. 2d 912 (Pa. 2002).

 

Who Decides the Noncompete Case, a Judge, Jury, or Arbitrator?

When it comes to enforcing non-compete agreements, it's crucial to remember that the decision to restrain a worker from employment rests solely with the judge, not a jury. While a jury may determine damages, they cannot issue a restraining order. Therefore, having an attorney familiar with the tendencies of specific judges in non-compete cases can be invaluable.

However, parties can agree to have a private arbitrator decide the work restriction issue outside of the court system. It's important to review your non-compete agreement to see if it contains a binding arbitration clause, which would require all disputes to be handled through arbitration, for example, through the American Arbitration Association.

 

 Is it Possible to Settle a Noncompete Clause Dispute? 

Yes. Every noncompete is negotiable both during and after employment.  The parties can agree to:

• • • • Limit the scope of the noncompete, 
      • Allow the employee to buy out of it (E.g., the employee pays the employer $10,000 to be let out of the noncompete),  
      • Replace the noncompete language with heightened trade secret protections, forbidding the employee from doing work for certain customers or sharing customer information, or,
      • Forget the noncompete ever existed and agree to an Non-Disclosure Agreement, preventing the employee from bragging about escaping the non-compete, essentially.      

 

Did the Federal Trade Commission (FTC) Ban Noncompetes? 

The FTC attempted a ban, but it failed.  It's being appeal through the courts, but it will likely never become law. The bottom line is, only Congress can pass new law, and so the FTC's efforts will almost certainly fail based the separation of powers concept in our Constitution. Click here for more details about the history of the FTC's attempted ban.

 

Did Congress Ban Noncompete Enforcement? 

No.  Congress attempted a ban, but it failed, like the FTC's attempt.  The Senate also passed a bill to ban noncompetes, but the bill never passed the House.  

 

Has Pennsylvania Banned Noncompete Enforcement?

No.  While some states such as California have outright banned the enforcement of a non-compete agreement, Pennsylvania has not banned the enforcement of a covenant not to compete.  That said, effective January 1, 2025, Pennsylvania will limit the scope of non-competes for certain (but not all) healthcare workers to one year, but only where the employer has quit, and was not fired for cause. This is the Fair Contracting for Health Care Practitioners Act (the “Act”).  Click here for more. 

Pennsylvania's Attorney General has supported the FTC's proposed ban on noncompete enforcement, but Pa has yet to outright ban non-compete agreements. 

 

Do All States Honor Noncompete Agreements?

No.  California, Montana, North Dakota, and Oklahoma, have all banned non-compete agreements for employees.  Nor are they required to honor a noncompete from another state.  

 

Noncompetes Apply to Doctors, But Not Lawyers?

Yes, it's true.  A doctor (physician) can be bound by a non-compete, click here for more, but a lawyer cannot.  Click here for why lawyers are exempt.    

 

Who Pays For Attorney Fees? 

In Pennsylvania, each side pays their own attorney fees, unless they agree otherwise in a contract. Recently, PA's Supreme Court found that an employer's legal fees incurred beyond the duration of the one year noncompete could also be recovered from the employee violating the noncompete.  Vinculum, Inc. v. Goli Technologies, LLC, 310 A. 3d 231 - Pa: Supreme Court 2024.

 

Can The Employee Pay Damages As Well?

Yes.  A well-drafted noncompete in favor of the employer will make the employee responsible to pay: 

• • 1. all litigation costs,
    2. a stipulated amount of money to pay for training provided by the employer, and 
    3. stipulated damage amounts for soliciting business and customers away, even if no customer actually went with the employee.  

As for points (2) and (3), a court will enforce these with two conditions met.  One, the money sought by the employer is a reasonable approximation of the damages sustained by the employer.  And two, objective determination of damages would be nearly impossible.  

 

Does My Liability Insurance Cover My Defense Costs?

No. Your homeowner or renter's insurance only covers your "negligence," such as accidental damage caused, but not your failure to abide by a contract. Click here for more.  

 

What if There is No Written Noncompete Clause?

Pennsylvania, like many other states, has something called the Inevitable Disclosure Doctrine ("the Doctrine"), which is simply:  If a high level worker who is privy to trade secrets goes to work for a competitor ("Second Employer"), it is "inevitable" that said worker will disclose secrets to the second employer and thus, the courts, in certain circumstances, will restrain said worker from working for the Second Employer. Pennsylvania, however, had modified the Doctrine to not assume that disclosure is "inevitable." A judge must consider numerous factors in applying the Doctrine, such as whether:

• • • The employee is a high level person,
    • The second employer is in direct competition with the first and offer the same products or services,
    • The employee's job for the second employer is virtually identical to his first position;
    • The information at issue qualifies for trade secret protection;
    • The trade secrets at issue are highly valuable to both the old and the new employers; and
    • In leaving her employment, the employee engaged in bad faith.

 

Why Sue an Employee Over a Questionable Noncompete? 

An employer -- having reason to believe an employee is violating a non-compete -- might be well advised to file suit, even if not likely to win. But why? It's free advertising, because it may deter others from violating their noncompete with the same employer.  Plus, while a suit is pending, the employer can make an example of the former employee, serving discovery on that person (requests for documents and a deposition), while driving up their costs, even if each side pays their own legal fees.   

 

Can an Employer Go Too Far to Enforce a Non Compete?

Yes. The employer can be liable for punitive damages and costs of suit, if filing suit for a frivolous or illegitimate purpose, such as to harass or intimidate an employee. See 42 Pa. Cons. Stat. §  8351. For this reason, an employer would be well advised to hire a private investigator and confirm the fact of wrongful "competition" before filing suit.  

Likewise, an employer can be found liable for "tortious interference," if baselessly trying to interfere with the employee's contract with a new employer.  

We're also trusted as local counsel for people outside of Pennsylvania with any non-compete agreement issue in Western PA.  This includes Allegheny, Beaver, Butler, Washington, Greene, and Westmoreland Counties.

 

Do I Need a Lawyer For a Non Compete Dispute?

Yes.  A Pittsburgh lawyer at our 8 lawyer firm will walk you through all defenses to non-compete enforcement in PA.  We also find creative and cost-effective solutions for the employer and employee, alike.