In Pennsylvania, if an employment contract containing a restrictive covenant is entered into subsequent to employment, it must be supported by new consideration. Recently, in L.B. Foster v. Barnhart, 2015 WL 3622287 (3d Cir. 2015), the Third Circuit interpreted Pennsylvania law in affirming the decision of the district court that participation in a company sales incentive plan can provide adequate consideration for signing a contract not to compete. In 2007, Barnhart signed a non-compete contract and agreed that he would not disclose his employer’s proprietary information, or work for a competitor, for one year after he ceased to work for LB. Foster, Co. That year, Barnhart received a bonus because signing the non-compete contract enabled him to participate in the 2007 sales incentive plan.
In 2014, Barnhart resigned and began to work for a direct competitor. L.B. Foster, Co. sued Barnhart and alleged that he took proprietary sales information and violated the agreement not to compete. Barnhart argued that the contract was not enforceable because he did not receive anything in return when he signed it, and therefore the contract lacked consideration. The district court disagreed and found that Barnhart’s participation in a sales incentive plan was sufficient to constitute consideration for signing the non-compete agreement. The Third Circuit affirmed and held that there was adequate consideration “because L.B. Foster gave Barnhart something of value that it was not already legally obligated to provide.”
Philadelphia Employment Lawyers at Sidkoff, Pincus & Green Take On Non-Compete Agreement Cases
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