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Pennsylvania considers ending non-compete agreements

Pennsylvania now enforces non-competition agreements if certain conditions are met. A bill pending before a state house legislative committee, however, would severely restrict their use. This could change the circumstances for negotiating employment contracts.

Now, Pennsylvania generally enforces these agreements if they are a secondary part of the employment relationship, the parties gave up and received something valuable for entering this agreement, the time and geographic restrictions are reasonable, and these restrictions were designed to protect the employer's legitimate interests. Courts rule on their enforceability by balancing the employer's protectable business interest and the employee's interest in earning a living in their chosen profession with the public interest.

Taking employment is valuable and sufficient consideration for enforcing a non-compete agreement in Pennsylvania. Geographic and time restrictions were also upheld if these are reasonably necessary for protection of the employer. For example, courts allowed geographic restrictions that covered the entire country and time restrictions as long as two years.

The pending bill, titled as the Freedom to Work Act, would make non-compete agreements illegal, unenforceable and invalid in most circumstances. There would be exceptions for the sale of a business, partnership dissolution or dissociation of a partner and for non-competition agreements that were in force before the bill becomes legally effective.

One of the bill's sponsors justifies the measure by stating that it would help keep workers in Pennsylvania by removing geographic restrictions and allow small businesses to hire the most talented workers. The improving economy and drop in unemployment also present a favorable atmosphere for this measure.

Pennsylvania's bill follows the intent of laws in California and North Dakota. California courts have not allowed any noncompete agreements under any circumstances since the passage of that law. North Dakota courts invalidated these agreements except in certain limited situations.

Pennsylvania's bill, however, has remained in a House committee since Nov. 2017. It was not taken up and no votes are scheduled. The measure may die in the legislative session ending this year.

Workers facing non-competition agreements should seek legal assistance. An attorney can help them negotiate a reasonable settlement or pursue their rights in court.

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