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Can your organization enforce its non-compete agreements?

On Behalf of | Dec 10, 2023 | Restrictive Covenants

The corporate world is notoriously competitive, and businesses need to take all possible steps to hold an advantage over their rivals. Nonetheless, all business strategies must adhere to the law.

Non-compete agreements are legal tools that are used to prevent employees from jumping ship and working for rival firms. These agreements have been subject to numerous disputes in recent years, but they are currently enforceable in Pennsylvania.

Nonetheless, enforcing non-compete agreements isn’t always straightforward for businesses. Outlined below are a few important things to consider.

There must be consideration

For a non-compete agreement to be enforceable, the employee must receive adequate consideration. In other words, the employee must receive something of value for abiding by the arrangement. For instance, they may be offered a role within the company, higher compensation or stock options for agreeing not to work for rival firms.

Time limits must be reasonable

Typically, a non-compete agreement will restrict the employee’s ability to work for competitors within a certain geographic area and for a specified period. These terms must be reasonable.

For example, restricting an employee from working for a rival within the state for a period of 6 months after leaving would likely be deemed reasonable in court. However, restricting the employee from ever working for a similar company within the United States would likely be unenforceable due to the unreasonable terms.

Non-compete agreements must also be necessary to protect the interests of the business. As you can see, the law in this area can be complex. Seek legal guidance to find out more about the methods you can utilize to protect your company.