Philadelphia-Area Lawyers Experienced in Non-Compete Agreements
Is the Severance Worth Potentially Taking Yourself Out of Your Chosen Vocation?
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situation, your disability/FMLA leave,
your employment/non-compete contract, a separation agreement,
your wage or overtime claim, your unemployment
appeal or your potential lawsuit at no charge to you.
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There are some crucial decisions to
be made when your former employer offers you a Separation Agreement which
includes an offer of severance but requires you to agree to confidentiality,
non-competition and non-solicitation provisions, not to mention a Release of
all claims you may have against the company.
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| Can Be Tricky |
Did You Already Have a Non-Compete in Place Before Your Separation?
Does it Make a Difference if I Have Already Signed Non-Compete Agreement?
It certainly does. Courts look much
differently at non-compete contracts signed by an employee when he\he starts a
job, versus one signed by the employee in exchange for compensation in the form
of severance upon departure from employment. That is to say, courts are less
likely on balance to fully enforce a non-compete signed by an employee at the commencement of employment, which they
often consider something like contracts
of adhesion (i.e. one in which you had no choice), versus a non-compete
signed by an employee in exchange for compensation at the end of employment, which they view as a far more voluntary act by the employee.
Consequently, when you receive an
offer of severance in a separation agreement that includes restrictive
covenants such as a non-competition clause, it is imperative that you first
determine whether you previously signed a document that contained such a
provision. If you have not previously signed such a contract, you will be free
from limitations on your ability to obtain new employment unless you sign the
separation agreement.
One clue to look for is this: if you
will not previously signed an employment -related document that includes
restrictive covenants such as those relating to confidentiality, non-competition
and non-solicitation, the severance agreement will contain full and complete
restrictive covenants. If, on the other hand, you have already signed a
document containing such restrictive covenants (when you took the job, for
example), the separation agreement may merely ask you to affirm that you
continue to be willing to abide by the terms of the existing restrictive
provisions.
NOTE: Under Pennsylvania's "worthless employee" doctrine, a non-compete agreement that you previously
acquiesced to may not be enforceable unless you sign a severance agreement
affirming your willingness to comply with the terms thereof. This is often the case when someone is laid off, let go via reduction in force or terminated for alleged poor performance.
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| Employee Subject to RIF "Worthless" |
Under Pennsylvania Law, if an Employee
has been Separated due to Reduction in Force, Layoff or Alleged Poor
Performance, a Previously Agreed Upon Non-compete Contract May be Void
In Pennsylvania, an employee that has
been let go through no fault if his/her own may been deemed a “worthless
employee” so that some or all of a previously executed non-competition
agreement is considered void.
However, if an employee that is been
subjected to a layoff, etc., signs a separation agreement wherein the employee
agrees to abide by the terms of the previously agreed upon restrictive covenants,
then the employee has waived any arguments that the original contract is void
pursuant to the worthless employee doctrine. Simply stated, courts view a
separation agreement as being a brand-new contract and the payment of severance
in exchange for the employee’s promise to abide by the restrictive covenants in
question will be deemed to overcome the worthless employee argument.
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| That's Consideration! |
Under Pennsylvania Law, a
Non-Compete Agreement Signed After the Employee Commences Employment is Non-Binding
Unless the Employer Provides “Additional Consideration” to the Employee
In addition to the worthless
employee doctrine, there is another principle under Pennsylvania law to bear in
mind.
While a non-compete covenant signed at the outset of employment is always
considered to be supported by adequate consideration (i.e. value given in
exchange for the employee’s promise to comply with the restrictive covenant),
one signed weeks, months or even years after
the commencement of employment may not be enforceable unless the employee
was at the time that the non-compete was executed provided with “additional
consideration.”
In this context, “additional
consideration” may take many forms, such as a promotion, payment of money in
the form of a bonus or raise, entitlement to participate in an employee benefit
plan, the granting of stock options, etc.
I Have Never Signed Non-Compete Contract
with My Employer and Now I Have Been Let Go -- Should I Agree to a Non-Compete
in Exchange for a Severance Payment?
In this scenario, one must determine
whether the value of offered severance payment outweighs the restrictions of
the non-compete clause. If you been offered 6-months of severance in exchange
for a 6-month non-compete, the answer may be easy. But suppose you are offered
2-months of severance and in exchange for a 2-year non-compete, a much more
common scenario? Bear in mind the deterrent
effect of a non-compete when seeking new employment may be substantial.
It is no secret that prospective employers are quite gun-shy when confronted
with the decision to hire an applicant bound by a non-compete limitation.
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| Absence Does Not Make Client's Heart Grow Fonder |
Up to this point, this Post has generically
referred to “non-compete agreements.” This is the short-hand terminology for
such contracts but, as noted above, many employment agreements also contain
confidentiality and non-solicitation restrictions as well.
Non-solicitation
clauses found in such agreements typically prohibit
employees from accepting business from any customer or client of their former
employer for a year or two following the employee’s departure. For employees in
“customer facing positions,” such as recruiters, salespersons and account
managers, such a non-solicitation covenant can have devastating consequences. After
all, even soldiers who go off to war have been known to lose their
girlfriend/boyfriend after a year or two…
Philadelphia
Area Non-Compete Attorneys Representing Employees
We are employment lawyers who represent employees in Pennsylvania.
We typically represent workers who need an employment lawyer
in Philadelphia County, Chester County, Delaware County, Bucks County,
Berks County, Lancaster County and Montgomery County.
No Charge for an Initial Discussion
610-647-5027
Pennsylvania Non-Compete Agreement Lawyers Provides Free Telephone
Consultations (15 Minutes in Duration)
If you are looking for a lawyer who regularly handles
non-compete cases, and live in Philadelphia, Paoli, Charlestown, Malvern, Devault, Exton, West Chester, West Goshen,
King of Prussia, Villanova, Wayne, Devon, Berwyn, Bryn Mawr, Haverford,
Ardmore, Newtown Square, Broomall, Media, Nether Providence, Swarthmore, Radnor,
Springfield, Blue Bell, Plymouth Meeting, Chestnut Hill, Lower Gwynedd, Skippack,
Doylestown or any of their surrounding towns, feel free to send us an
e-mail via our Contact Form or give us a call at 610-647-5027. We are always glad to spend some time with people
via a free telephone consultation.
Need an Experienced Lawyer for a Non-Compete in the Philadelphia
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