Can a company enforce a noncompete clause due to unemployment?

On Behalf of | Oct 16, 2020 | Employment Law -- Employer |

Businesses frequently face personnel changes. Business partnerships may not last forever, and valued employees may choose to depart the company. The separations might even occur on good terms. Regardless, questions could arise regarding a noncompete contract. Enforcing a noncompete agreement may require taking drastic legal steps. Sometimes, such actions even occur during periods of high unemployment.

In Pennsylvania, employees who lose their jobs may discover that the courts make determinations regarding noncompete contract enforceability on a case-by-case basis. This assumes that the contract was legal by state law. Pennsylvania statutes put requirements on the employer, including reasonable duration limits and more, for the contract to be valid. Pennsylvania residents who work in a bordering state or have a remote employer in a far-off state may find that the employer’s state laws apply.

Some may assume that non-compete agreements place unfair burdens on the employee. There might be outrageous agreements a court might throw out. For example, a contract that mandates a lifetime ban from working in the same industry would probably not be enforceable. However, a one-year non-compete agreement might come off as onerous unless there were other issues in the contract.

Ultimately, business owners and corporations may require non-compete agreements to protect themselves. For example, a company may hire a trainee and teach the person a great deal about a particular industry. The company might not want the person to quit in less than six months and immediately work for a competing startup business. Banning the exiting employee from starting a similar business for one year could help protect the company.

Enforcing non-compete agreements may prove challenging. Business owners interested in pursuing such litigation might wish to consult with an attorney.