In some industries, employers require new-hires to sign non-compete agreements. These agreements typically become active when the employee leaves the company. Sometimes, employers have this requirement in order to protect trade secrets, goodwill, and to keep former employees from taking customers or clients with them.
Some courts, however, do not look at non-compete agreements in a positive light. They often consider them to be a limitation on an individual’s right to make a decent living. That is why, when an employer takes legal action against an employee for violating a non-compete agreement, the court will go over every single detail of the agreement.
If you have made it through a round of interviews and a potential employer offered you a job that you can only get if you sign a non-compete agreement, you should first consult with your attorney before putting pen to paper. Just like they say in the movies, never sign anything until your lawyer reads it. For some more information on the basics of non-compete agreements, read below.
Requirements of a valid agreement
In order for a Pennsylvania court to support a non-compete agreement as valid, it must meet certain requirements. First, it must have included consideration when you signed it. In general, “consideration” is usually a job or something else of value that you will receive. Second, the agreement has to work as a tool to “protect a legitimate business interest” of your potential boss. Lastly, the contract has to be reasonable. This means that it cannot place any ridiculous requirements on you and the time period and geographical limits have to be reasonable.
Legitimate business interest
As mentioned above, in order for a non-compete agreement to be valid, it has to provide protection for a business interest that the court considers legitimate. This usually applies to confidential information, trade secrets and goodwill. The idea is that the agreement will keep the employee from taking advantage of one’s inside knowledge in order to set up a competing business.
Like most cases, the court will judge whether or not the terms of the non-compete agreement are reasonable based on the specific circumstances of the case. What is reasonable for a manufacturer may not be reasonable for an accountant. Also, the time the agreement is active cannot exceed the period for which the protected information has value.
For example, if a company is trying to protect confidential information, you cannot be sued for breach of contract if the company makes that information public and you then use it to start your own business. In terms of geography, a court usually will not enforce a non-compete agreement for an area where the employer does not conduct business.
If a prior employer has accused you of violating the terms of a non-compete agreement, you may be able to fight back. If the contract does not meet the above requirements, it may not be valid. Your attorney will be able to help stand up to an unreasonable non-compete agreement.