Non-Compete Agreements in Pennsylvania: Legal Standards

The General Rule in Pennsylvania

Pennsylvania enforces non-compete agreements under a reasonableness standard. Pennsylvania courts have developed extensive case law on restrictive covenants, with the framework rooted in decisions like Hess v. Gebhard & Co. and refined through numerous appellate rulings.

Pennsylvania's Enforceability Test

A non-compete is enforceable if:

• The restrictions are reasonably necessary to protect the employer's legitimate business interests
• The restrictions are reasonably limited in duration and geographic scope
• The restrictions are supported by adequate consideration
• The restrictions are not unduly burdensome on the employee
• The restrictions are not harmful to the public

Consideration: The Critical Distinction

Pennsylvania has a particularly important rule regarding consideration:

• New employees: Employment itself is adequate consideration when the non-compete is signed at the start of employment.
• Existing employees: Continued employment alone is not sufficient consideration. The employer must provide new and valuable consideration such as a raise, bonus, promotion, stock options, or access to new specialized training. This is one of the most commonly litigated issues in Pennsylvania non-compete cases.

Duration and Geography

• Duration: Pennsylvania courts have upheld non-competes of one to two years as reasonable. Three-year restrictions have been upheld in limited circumstances involving extensive trade secret access or senior roles.
• Geography: Must be proportionate to the employer's business territory. Given Pennsylvania's size and the Philadelphia and Pittsburgh metropolitan areas, courts consider the practical impact on the employee's ability to work.

Reformation Power

Pennsylvania courts have the authority to modify overbroad non-competes. Courts can reduce the duration, narrow the geographic scope, or limit the restricted activities to make the agreement enforceable. However, courts are more likely to reform when the original terms are only slightly overbroad rather than fundamentally unreasonable.

Red Flags

• No new consideration for existing employees beyond continued employment
• Duration exceeding two years without strong justification
• Geographic scope covering the entire Mid-Atlantic region for a locally-focused role
• No identified trade secrets or customer relationships
• Overly broad definition of competitive activity

When to Consult a Lawyer

Consider consulting a Pennsylvania employment attorney, particularly regarding the consideration issue if you signed a non-compete after starting your job. The consideration question is often dispositive in Pennsylvania non-compete disputes.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.