Employment Contracts and Restrictions Part 1: The Basics

Many employers are concerned about training an employee, teaching them about their business, introducing them to customers, sharing confidential information, etc., only to see them leave at some future time to go work for a competitor.  To stop this from happening, the employer may ask an employee to sign an agreement that prohibits such conduct. These prohibitions are often referred to as “restrictive covenants.

At the outset, to be clear, the law of restrictive employment covenants in Pennsylvania is such that there is a presumption in favor of the employee, because of the public policy consideration of wanting workers to be as free as possible to earn a living, support their families, etc.  However, the law is such that parties are also free to enter into reasonable employment agreements as well.

So, what are the most common types of employment restrictions? The most popular restrictions are those which prohibit: 1) competition, and 2) disclosing and disseminating confidential information.  Other employment covenants may include a provision that any idea, plan, system, method, etc., developed by the employee during the period of employment is and becomes the intellectual property of the employer, not the employee.

What if there is no employment agreement in place? In the absence of an employment agreement restricting competition, the employee is free to compete against an employer at any time.  Cases have said that an employee may even begin to prepare to compete against an employer while employed with the employer so long as there is no agreement prohibiting such conduct.  Unlike restrictions against competition, however, a prohibition against disclosing confidential information is not required to be in a written agreement to be enforceable. Indeed, in Pennsylvania there is an obligation upon every employee to keep confidential information, well, confidential. An employee who discloses confidential information to another employer or who uses such confidential information in other ways, is subject to liability for doing so.

Of course, departing employees who have an employment agreement with restrictive covenants often ignore them.  They leave and start competing, hoping the former employer won’t find out or, even if they do find out, won’t care.  On other occasions, the departing employee begins to work in a manner that they think is not in violation of their agreement.  In either event, a court will often have the last say in the matter.  The requirements of a valid and enforceable employment agreement with restrictive covenants is the subject of my next post.

If you need help drafting, interpreting, or enforcing restrictive covenants and employment agreements, please contact the Pennsylvania employment lawyers serving York, Lancaster, Dauphin and surrounding counties at www.TrinityLaw.com.

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