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Philadelphia Business Lawyers: Restrictive Covenants Disfavored in Pennsylvania

Disfavored in Pennsylvania and cannot be assigned to Purchaser of Business without Consent

In the area of employment law, restrictive covenants, which include non-competition and non-disclosure covenants, are agreements made between employers and employees which limit the employee’s ability to compete after the employment terminates. In Pennsylvania, restrictive covenants are enforceable if they are “incident to an employment relationship between the parties; the restrictions imposed by the covenant are reasonably necessary for the protection of the employer; and the restrictions imposed are reasonably limited in duration and geographic extent.” Hess v. Gebhard & Co. Inc., 808 A.2d 912, 917 (2002).

Restrictive covenants are not favored in Pennsylvania as they have been historically viewed as a trade restraint that prevents a former employee from earning a living. Id. In Hess, the Supreme Court of Pennsylvania discussed whether an employee’s non-compete agreement was transferable to the new owners of the business for which he worked. The Court held that the “restrictive covenant not to compete, contained in an employment agreement, is not assignable to the purchasing business entity, in the absence of a specific assignability provision, where the covenant is included in a sale of assets.” Id. at 923.

For more information, call Philadelphia employment lawyers at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.