Monday, April 9, 2018

THE ESSENTIALS OF AN EMPLOYMENT AGREEMENT CONTAINING VALID, ENFORCEABLE CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION CLAUSES IN PENNSYLVANIA


Experienced Pennsylvania Employment Law Attorney Who Provides Enforceable Non-Compete Agreements for a Reasonable Flat Fee

John A. Gallagher, Esquire
Creating, Negotiating and Litigating Restrictive Covenants in Pennsylvania Since 1991

When I started practicing law in 1991, employment agreements that contain what are known as restrictive covenants, that is confidentiality, non-solicitation and non-competition clauses, were somewhat rare. Now, they are everywhere.


Over the years, the courts have made some basic and essential rulings that govern construction of restrictive covenants, and it is fairly easy to determine the circumstances under which such clauses will be enforceable.


Is the Goal to Attract and Retain High Quality Individuals?
Currently, it remains relatively easy to attract qualified candidates for employment even where requiring the candidate to sign an employment agreement containing restrictive covenants is the rule. However, I have noticed a trend over recent years where highly-qualified candidates are pushing back and refusing to accept a job if they are required to sign contracts that greatly limit their future vocational mobility. In many cases, a reciprocal severance package will be required (i.e. “I will agree not to compete for 6-months if you agree to pay me 6-months severance if you fire me without cause”).

What is the Best Method to Make Sure New Employees Agree to Non-Compete Agreements

One way that employers attempt to get around this is by not informing the employee of the existence of the requirement that they execute an employment agreement containing restrictive covenants until after they are very been onboarded. Another approach is to include restrictive covenants within an employee handbook, and to have the employee sign off on the handbook during orientation.


How Do You Want to Start New Relationship?
While these methods may enable an employer to successfully bind a new employee to the said restrictive covenants, is that really the way you want to start off your employment relationship?

There is a better way, and it will improve your candidate pool, and your workforce.

Are Confidentiality, Non-Compete and Non-Solicitation Clauses Valid and Enforceable in Pennsylvania?

I drafted restrictive covenants to be placed within employment agreements on behalf of employers for 15 years. When doing so, I always took into account the following rules that generally exists in Pennsylvania (and throughout much of the United States):


TRUE Trade Secrets Are Rare Under Pennsylvania Law
1) courts will always enforce confidentiality agreements if they find that the employee has taken the former employer’s documents and information with them upon departure from employment, and has used that confidential information in an overt fashion in their new endeavor.


Courts Will Not Tolerate Workers Who Misappropriate Their Former Employer's
Materials and Information in a New Business Endeavor, Whether a Trade Secret or Not
2) unless the employee has engaged in such nefarious conduct where confidential information is concerned, the courts consider very little employer information to be actually confidential. For example, and generally speaking, customer names, addresses, employer pricing, etc. are not deemed confidential under Pennsylvania law because they are generally available to the public at large upon research via the phone book, Google etc.


3) the only exception to the above confidentiality rule is where the departing employee truly possesses trade secretes. Think the Coca-Cola formula, or how Thomas puts those crinkles in their English muffins (indeed, one former Thomas's executive was enjoined from taking a job with Hostess because he knew the recipe and the court figured that he would inevitably disclose it to his new employer!). Courts will generally prohibit an employee who had signed a noncompete agreement and possesses such sensitive information from going to work for a close competitor of his/her former employer – even if there is no evidence that the employee has disclosed such trade secrets to the new employer. The theory behind the court’s thinking is that there will be “inevitable disclosure” of the trade secrets. After all, why would a close competitor seek to hire such a (presumably highly compensated) employee if not to take advantage of the knowledge that the employee has?
Now THAT'S a Trade Secret!!!
4) where non-competition clauses are concerned, the court similarly will not enforce them unless there is some evidence that the employee has engaged in nefarious conduct. For example, if an employee solicits former customers of his or her former employer while working for the new employer, the non-compete will almost certainly be enforced. Or, if the employee should use confidential information overtly while working for the new employer, there is a good chance the non-compete will be enforced as well. Where, however, there is no evidence that the employee has special knowledge, or is done anything wrong, courts will not generally require (i.e. order) an employee to quit a new job working for a competitor merely because they executed a non-competition agreement.


You Were Paid to Get to Know Your Former Employer's Clients and Customer Base -
Soliciting Them After You Leave is a BAD Idea and Courts Will Not Allow That
5) non-solicitation clauses are at the heart and soul of what is enforceable in Pennsylvania and elsewhere where restricting employee’s rights to future employment are concerned. An employee bound by a non-solicit who departs one employer, whether via termination or resignation, and then goes to work for a new company, or even start a new company, and thereafter solicits clients/customers the employee serviced while employed with the former employer, will be enjoined from continuing such conduct by most Pennsylvania courts.

Cost-Effective Employment Agreements Containing Confidentiality, Non-Competition and Non-Solicitation Provisions Prepared by a Qualified Pennsylvania Employment Lawyer

Based upon the above principles, I sometimes would not even include non-compete provisions within employment agreements. Why limit the potential pool of candidates by requiring the execution of a non-compete agreement when the employer’s true, legitimate business interests can be preserved by will appropriate confidentiality and non-solicitation clauses?


Preparing an employment agreement that at once protects the interest of the employer but at the same time does not seem overbearing and overly restrictive from the employee’s perspective is key to attracting qualified employment candidates. The preparation of such agreements can be done in a cost-effective, low cost fashion by a qualified employment lawyer who has prepared, negotiated and/or litigated hundreds of such agreements in the past.




Cost-Effective - Experienced -
Sensible
Philadelphia Area Non-Compete Employment Attorney Who Prepares and Negotiates Employment Contracts



John A. Gallagher is an employment lawyer who represents employees in Pennsylvania. 

John handles employment-related matters of all kinds originating in Philadelphia County, Chester County, Delaware County, Bucks County, Berks County, Lancaster County and Montgomery County.

Pennsylvania  Employment Attorney Provides Free Telephone Consultations (15 Minutes in Duration)

If you are looking for an employment lawyer, and live in Malvern, Wayne, King of Prussia, Downingtown, Glenside, Doylestown, Radnor, Newtown Square, Exton, Philadelphia, West Chester, Skippack, Langhorne, Haverford, Nether Providence, Broomall, Drexel Hill, Reading or any of their surrounding towns, feel free to send me an e-mail or give me a call.  I am always glad to spend some time with people via a free telephone consultation.

Click Here if you have questions about any aspect of employment law, from wrongful termination, to wage and overtime claims, to discrimination and retaliation laws, to Family and Medical Leave

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Click Here to e-mail John directly; Mr. Gallagher has handled hundreds of Referee Hearings throughout Pennsylvania.

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