The Importance of Noncompetition Clauses in Employment Contracts
Noncompetition or noncompete clauses are common additions to most Pennsylvania employment contracts. They restrict the ability of workers from using the training or proprietary information acquired at their jobs to unfairly compete against their former employers. The U.S. Treasury reports that approximately 30 million American workers, representing 18 percent of the total workforce, are covered by noncompetition clauses.
How noncompete clauses work
Noncompetition clauses protect a company’s trade secrets, customer lists, and other proprietary information by imposing reasonable restrictions in terms of time and distance on an employee’s ability to use the information when his or her employment ends. For example, a clause might prevent a worker from leaving and going to work for a competitor located within a three-mile radius for three years after his or her employment ends.
Requirements for enforceable noncompetition clauses
Because of the restrictions they impose on the ability of people to work, noncompetition clauses are carefully scrutinized by courts asked to enforce them. As a general rule, the clauses must meet the following conditions to be enforceable:
- Consideration: Workers must receive something of value in exchange for agreeing to a noncompete clause. The offer of a job is usually sufficient consideration.
- Reasonableness: The restriction on a former worker’s ability to engage in his or her profession must be reasonable under the circumstances associated with each individual situation.
- Necessity: Restrictions on a worker must be necessary to protect a legitimate business interest of the employer. In other words, it must be necessary to justify limiting where and when someone can be employed.
Getting assistance drafting an enforceable agreement
It is essential to obtain sound legal advice and guidance from attorneys with experience drafting employment contracts. The attorneys at Charles Law Offices in Allentown know the law and keep up to date on court decisions affecting noncompetition clauses.