Non-compete agreements are a regular source of anxiety for both employers and employees in Pennsylvania. Employers want to protect their customer relationships, trade secrets, and competitive position. Employees want to know whether the non-compete they signed will actually prevent them from earning a living if they leave. The answer, as with most legal questions, is: it depends.
Pennsylvania courts will enforce non-compete agreements, but only if the agreement meets several requirements that the courts have developed through decades of case law. Understanding those requirements is essential whether you are drafting a non-compete or trying to determine whether one you signed is binding.
The Three Requirements for Enforceability
Pennsylvania courts apply a three-part reasonableness test to non-compete agreements. To be enforceable, the restriction must be reasonable in all three dimensions:
Reasonable duration. Courts evaluate whether the time period of the restriction is no longer than necessary to protect the employer's legitimate interests. There is no bright-line rule, but Pennsylvania courts have generally upheld restrictions of one to two years. Restrictions of three years or more are scrutinized more heavily and are more likely to be found unreasonable. The specific industry matters: a one-year restriction may be reasonable for a sales position but excessive for a lower-level employee with limited access to confidential information.
Reasonable geographic scope. The geographic restriction must correspond to the area where the employer actually does business or where the employee had client contact. A nationwide restriction for a company that operates only in Western Pennsylvania is almost certainly unenforceable. Courts look at where the employee actually worked, the scope of the employer's market, and whether the geographic restriction is tailored to the legitimate interest being protected.
Reasonable scope of activity. The restriction cannot be so broad that it prevents the employee from working in their entire field or profession. It should be limited to the specific type of work that competes with the employer's business. A non-compete that prevents a software developer from working for any technology company is far broader than necessary to protect the employer's interests. A restriction limited to developing competing products in the same market niche is more likely to be upheld.
Adequate Consideration
A non-compete agreement must be supported by adequate consideration, meaning the employee must receive something of value in exchange for agreeing to the restriction. What constitutes adequate consideration depends on when the agreement is signed:
At the time of hiring: The job itself is generally sufficient consideration. If you sign a non-compete as a condition of employment before you start working, the agreement is supported by the consideration of the employment opportunity.
During employment: If an employer asks a current employee to sign a non-compete after they have already started working, the continued employment alone may not be sufficient consideration under Pennsylvania law. The leading case on this point, Socko v. Mid-Atlantic Systems of CPA, Inc. (126 A.3d 1266, Pa. 2015), held that continued employment can be sufficient consideration if the employment continues for a "substantial" period after the agreement is signed. However, if the employee is terminated shortly after signing, the consideration may be deemed inadequate.
Additional consideration, such as a raise, bonus, promotion, or access to new confidential information, strengthens the enforceability of a mid-employment non-compete.
Protectable Interests
Pennsylvania courts will only enforce non-competes that protect a legitimate business interest. The recognized protectable interests include trade secrets and confidential business information, customer relationships and goodwill that the employee developed using the employer's resources, and specialized training provided by the employer at significant cost.
A non-compete designed solely to prevent competition, without protecting a specific legitimate interest, is unenforceable. If the employee's skills are general and widely available in the market, and they did not have access to confidential information or customer relationships, the employer will have a difficult time enforcing the restriction.
The Garden-Period Clause
A "garden leave" or garden-period clause is an increasingly common feature of non-compete agreements. Under a garden-period arrangement, the employer agrees to continue paying the employee's salary during the restricted period. In exchange, the employee agrees not to compete.
Pennsylvania courts look more favorably on non-competes that include garden-period provisions, because the employee is compensated for the restriction on their ability to work. A garden-period clause can make the difference between an enforceable and unenforceable agreement, particularly when the restriction is on the longer end of what courts typically allow.
Blue-Pencil Doctrine
Pennsylvania follows the "blue-pencil" or reformation doctrine, which means that if a court finds a non-compete agreement overly broad, it may modify the restriction rather than invalidating it entirely. For example, a court might reduce a three-year restriction to eighteen months, or narrow a statewide geographic limitation to the specific counties where the employee had client contact.
This is important for both sides: employers should know that an overbroad restriction will not necessarily be thrown out entirely, but employees should know that a seemingly unreasonable non-compete may still be enforced in a modified form.
Recent Trends
Several trends are shaping non-compete law in Pennsylvania:
FTC rulemaking. The Federal Trade Commission proposed a nationwide ban on non-compete agreements in 2023, but the rule was struck down by federal courts in 2024. While a national ban is off the table for now, the regulatory attention has prompted many employers to reconsider their use of non-competes, particularly for lower-wage workers.
Shift toward non-solicitation agreements. Many Pennsylvania employers are moving away from broad non-competes and toward narrower non-solicitation agreements, which restrict the employee from soliciting the employer's clients or employees but do not prevent them from working for a competitor. Non-solicitation agreements are generally easier to enforce because they are narrower in scope.
Increased scrutiny for low-wage workers. While Pennsylvania has not enacted specific legislation restricting non-competes for low-wage workers, courts are increasingly skeptical of non-competes imposed on employees who earn modest wages and have limited access to confidential information.
Practical Guidance
For employers: Draft non-competes that are tailored to the specific role and the specific interest you are protecting. Avoid one-size-fits-all templates. Provide meaningful consideration, especially for existing employees. Consider whether a non-solicitation agreement, combined with robust confidentiality provisions, might achieve the same objective with less litigation risk.
For employees: Read the non-compete carefully before signing. If possible, negotiate the terms, particularly the duration and geographic scope. If you are presented with a non-compete mid-employment, consult an attorney before signing.
At Ament Law Group, we draft, review, and litigate non-compete agreements for businesses and individuals throughout Western Pennsylvania. Whether you need to protect your business or understand your rights as an employee, call (724) 733-3500 or contact us online.
Related resources:
- Business Law Services
- LLC vs. S-Corp in Pennsylvania
- PA LLC Operating Agreement Guide
- Business Formation Services
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