It has become increasingly common for employers to ask new hires and employees of long standing to sign non-compete contracts. These are contractual agreements that are intended to prevent workers from sharing insider information about their company, as well as to protect the employer’s investment in training their workers. Where once these agreements were used only for high-level executive positions, workers at all levels are now being asked to sign them, and that has had a chilling effect on the ability to move from one job to another in order to seek advancement or better working conditions. Though noncompete clauses are legal in the state of Pennsylvania, they are the subject of a great deal of criticism, and they may not always be enforceable.
A court’s decision about the enforceability for a noncompete clause often comes down to whether the terms of the contract are reasonable in terms of their goal of protecting the business’ interest and proprietary information, as well as in terms of how much they limit the employee from finding new work. Most noncompete clauses will specify an amount of time or geographic distance as a limiting point, and if either is considered unreasonable then there is a good chance that a court will side with the employee.
It is interesting to note that courts across the country have been turning away from favoring employers in noncompete contract cases, and many states are beginning to pass laws banning their use. Pennsylvania legislators have joined this trend, and at the end of 2017 proposed House Bill 1938 states that because the goal of the Commonwealth is advancing the ability of companies to hire workers of their choosing and in lowering the unemployment rate, non-compete contracts are counterproductive. The arguments in favor of a ban mention allowing workers to earn a competitive wage and “maximize their talents.” The new law would make allowances for specific situations such as grandfathered agreements and noncompete clauses involving owners and partners.
Though the proposed Pennsylvania legislation is still in committee and is not yet scheduled for a hearing, it is an indication of things to come that its proposed wording includes assessing punitive damages and attorneys’ fees for employees whose employers impose unreasonable restrictions on them.