One of your key employees has just told you he is leaving your firm. Your first thoughts are whether you have sufficient resources in place to carry on his work while you look for his replacement. Then, you hear that he is starting his own business across town. Not only is he leaving a hole in your organization, he is about to be your competition.
As a business owner in this situation, the first thing you should do is pull your former employee’s personnel file and review the non-compete agreement he signed. (You do have a non-compete agreement, right?)
The primary question is whether the agreement is enforceable.
Essentially, a non-compete agreement, also known as a noncompetition agreement or non-compete covenant, is an agreement between an employer and an employee wherein the employee agrees not to engage in competition with his employer within a defined geographical area for a period of time after leaving his employment.
Non-compete agreements are very common in today’s business climate. Employees are often privy to trade secrets or other inside information that would diminish an organization’s profitability or business advantage if those secrets were used by a competitor. The expressed purpose of the agreement is to prevent a key employee or even a prior owner of a business from setting up shop down the street, pursuing the clients and using the trade secrets of the business he left behind.
Whether your agreement is enforceable depends on a number of factors. There is no bright line rule, but rather a body of decisions made by courts over the years that shape the likely enforceability of an agreement. Because a non-compete agreement effectively limits a former employee or owner’s future prospects for earning a living, the non-compete agreement cannot be too long in duration or too broad in geographical scope. Courts have applied varying limits on time and geography to different cases depending on the industry.
You may be in a position where the only way to find out if your non-compete agreement is enforceable is to seek enforcement in a court of law, or you may need help drafting a new non-compete agreement. The attorneys at the Scolieri Law Group, P.C. can help. Our experienced Pennsylvania business law attorneys can help you navigate the legal system to protect your business from unfair competition. Contact us today at (412)765-0546 or firstname.lastname@example.org.