The elements of a valid noncompete agreement

Q. What standards must Pennsylvania employers follow when drafting noncompete agreements?

A. Pennsylvania courts will enforce a covenant not to compete that satisfies four requirements. A valid noncompetition agreement must be:

  1. Ancillary to either an employment relationship or another lawful transaction (e.g., sale of a business).
  2. Supported by adequate consideration.
  3. Reasonably necessary to protect the legitimate business interests of the employer.
  4. Reasonably limited in duration and geographic scope.

In Pennsylvania, execution of a noncompetition agreement when employment begins is sufficient consideration for the agreement. However, additional consideration, beyond something the employee is already entitled to, is required for noncompetition agreements entered into after the employment relationship has begun. Continued employment alone is insufficient. It is always best to consult counsel to make sure the agreement does what you want it to accomplish.