Pennsylvania, like most other states, allows businesses to hire employees on an at-will basis; at-will employment means that the employee is free to quit whenever he or she chooses to do so. The employer must pay the employee for all the time the employee worked, even if the employee quit without notice. If the employee has signed an employment contract with the employer, then the employee might have to pay certain penalties if they quit before the end of the contract period; the employment contract will contain provisions about the procedures for early termination of the contract. In other words, whether or not you have an employment contract, your obligations to your employer end as soon as you quit your job or your employer terminates the employment relationship.
You may have to return any equipment that your employer issued to you, but beyond that, you are free to go on with your life and find a new job. Employers may try to limit the work that their former employees can do after the employment relationship ends, and in some cases, they succeed, but in general, controlling the professional activities of someone who no longer works for you is as unfair as it sounds. The Philadelphia non-compete agreement lawyers at HKM Employment Attorneys LLP can help you determine whether you are leaving yourself vulnerable to legal liability with the business activities you have engaged in since leaving your previous job.
Restrictive Covenants and Pennsylvania Employment Law
In employment law, the term “restrictive covenant” refers to any free-standing written agreement or any provision of a written contract the purpose of which is to limit the activities of the employee after the relationship ends. These are the most common types of restrictive covenants used in employment contracts:
- Non-disclosure agreement – The employee promises not to reveal confidential information about the employer (in other words, trade secrets) to people outside the employer’s company after the employee stops working for the employer. In other words, the former employee does not have the right to use the employer’s intellectual property. Another type of non-disclosure agreement is where the employer resolves the employee’s complaint about discrimination or some other kind of wrongdoing without going to court, and the employee promises not to reveal details about the complaint or its resolution.
- Non-solicitation agreement – In the event that the former employee goes to work for a company that competes directly with the former employer or sets up his or her own company that competes directly with the former employer, the employee promises not to solicit business from customers or clients of the former employer.
- Nom-compete agreement – The employee promises not to work for a company that competes directly with the former employer or set up a new company that competes with the former employer.
It is easy to see how non-compete agreements are the most restrictive kind of restrictive covenant.
Are Non-Compete Clauses Enforceable?
If a former employee breaches a non-compete agreement, the former employer has the right to sue the former employee and request damages in the amount of the money that the former employer lost when the former employee provided services to former clients of the former employer. The burden of proof is on the former employer to show that the former employee’s actions constitute a breach of the non-compete agreement. Therefore, employees are usually defendants in legal actions related to non-compete agreements.
A plaintiff in a non-compete lawsuit can prevail if they prove that a business relationship existed between the plaintiff and the defendant and that the parties signed a non-compete agreement. The plaintiff must also prove that the defendant did something that he or she promised not to do pursuant to the non-compete agreement. Finally, the plaintiff must provide evidence of the financial losses they suffered as a result of the defendant’s breach of the non-compete agreement. The court will enforce the non-compete agreement if it determines that the agreement was legally valid and that it was reasonable. Non-compete litigation is relatively rare because the amount of money it costs to engage in a lawsuit is so much that it is only worthwhile if the defendant’s breach of the non-compete agreement caused the plaintiff to suffer financial losses in the millions of dollars. A small business is probably not going to sue a former employee who sets up a business in a similar market niche.
Are Non-Compete Clauses Fair to Employees?
At their worst, non-compete agreements forbid employees to practice their professions except with the permission of the employer. It is obviously unfair to make a registered nurse who takes a job at a dermatologist’s office that she can never again work for a different dermatologist. The purpose of non-compete agreements is not to enable employers to say, “You’ll never work in this town again,” although some employers try to use them that way. By 2021, about one in every five employees in the United States who had an employment contract but did not have a bachelor’s degree was employed pursuant to an employment contract that included a non-compete clause.
In the summer of 2021, President Biden signed an executive order encouraging the Federal Trade Commission to take action against companies that require employees to sign unnecessary or overly restrictive non-compete agreements. Specifically, non-compete agreements should be of limited duration, and they should only be required of employees whose positions require them to gain extensive knowledge of the employer’s trade secrets. Beyond this executive order, the sentiment is growing that, in most cases, non-compete agreements are unfair to employees, as they work against fair composition in business and pose an obstacle to productivity.
Contact HKM Employment Attorneys LLP About Restrictive Covenants in Employment Contracts
The Philadelphia employment lawyers at HKM Employment Attorneys LLP can help you if your employer has required you to sign a non-compete agreement that you think jeopardizes the future of your career. Contact the employment lawyers at HKM Employment Attorneys LLP in Philadelphia, Pennsylvania, to set up a consultation.
