Pittsburgh Employee Restrictive Covenants

The Purpose of a Non-Compete Agreement

There are several potentially valid reasons you might ask employees to sign restrictive covenants They include the following:

• Deter and prevent current and former employees from sharing trade secrets and confidential information with competitors
• Prevent an employee from using the training and experience they received at your company to benefit a competitor
• Maximize the value of investments your company makes in its employees
• Prevent current and former employees from using your information to compete against you by starting their own businesses

What Makes a Non-Compete Agreement Enforceable in Pennsylvania?

A non-competition restriction will be highly scrutinized by the courts in almost every state.  The Pennsylvania Supreme Court decisions indicate non-compete agreements may be deemed unenforceable if they fail to serve legitimate purposes while unreasonably limiting the worker’s opportunities to earn a living.

Various details and nuances must be accounted for to determine whether a particular non-compete agreement is enforceable. Generally, though, an agreement may be regarded as enforceable in Pennsylvania if:

• It can be shown to protect a legitimate business interest
• An employee who signs a non-compete agreement after already being employed with a company receives some form of “consideration” (such as a raise, bonus orpromotion) in exchange for doing so
• The restriction is reasonably limited in time and geography to protect the business interests at stake

Given Court’s general disfavor of future employment restrictions, employers are wise to think critically through the following questions:

• What employees have access to information that could be used to benefit a competitor?Typically, the answer is not “all of them.” Your restriction will be more credible, if you have thought through which employees create a risk to your business that you need to mitigate and be able to articulate this risk.  For example, a receptionist may know some of your clients, but is he truly a risk to your business?  Alternatively, a salesperson has client lists, pricing structures, product information and client relationships, which all told could present an articulable risk to your business if she was to move to a competitor and share information or contact your customers.
• What exactly are you restricting your former employee from doing? Be specific.  If you aren’t the court will be.  Take the time to narrowly construe the area of restriction.  Don’t say “medical sales” but do say “the sale of orthopedic knee and should joints.”
• Where are you restricting the employee from working? Not everywhere.  What is the employee’s current territory, and where do you do business.  Even if you have a global presence, you should select a territory, where the employee has the most information and access, or very narrowly construe the subject area of the restriction and shorten the time it will apply.
• How long after a key employee leaves do you need to sure up your business and make a transition to cover the business of the former employee? It’s not forever, and rarely do courts give you an exact dates.  One years is universally acceptable to delay competition by a former employee.

What Makes Non-Disclosure, Non-Solicitation, and Confidentiality Clauses Enforceable in Pennsylvania?

Restrictions on sharing information or soliciting customers and employees are far more palatable than restrictions on future employment.  Yet, careful drafting is warranted.  Your language should be specific to your business and clear to the typical reader (tone down the legal speak).  These clauses, while acceptable and enforceable, will be enforced against the drafter if they are unclear

Industries where employee access to trade secrets and inventions, and other confidential information should be sure to include specific language on trade secrets and works for hire.  Do not presume these technical issues are addressed by general language on confidentiality.

How a Pittsburgh Employment Lawyer Can Help

None of this is meant to discourage you from requesting that your employees abide by the terms of restrictive covenant agreements. Remember, a sound agreement can protect your company in the long run.You simply need to be thoughtful in your drafting

At N. Stotler Law, we offer Pittsburgh advice on the use of restrictive covenants to protect your business interests. We’ll discuss your goals and assist you in developing a agreements that allow you to legally achieve these goals. For more information about what we can do for you, contact us online or call us at 724-841-5565.