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Pennsylvania Proposes Restrictions on Non-Compete Agreements

Pennsylvania is proposing to become one of several states where the use of non-compete agreements will be restricted.

After Massachusetts, New York City, and New Jersey introduced bills designed to protect workers from the dangers of non-compete agreements, New Hampshire, Vermont, and Pennsylvania have continued this trend by introducing proposals that will limit the use of these agreements.

If passed, the Pennsylvania and Vermont bills will ban all non-compete agreements in ordinary employee relationships. The New Hampshire bill was defeated in March 2018.

Prohibiting Non-Compete Agreements

The Vermont bill and the Pennsylvania bill both will prohibit all non-compete agreements, with the exception of those having to do with the sale of a business or dissolution of a business partnership. In the Vermont bill, the description of the prohibited agreement does not clarify whether both non-solicitation agreements and non-compete agreements are prohibited, or just non-competes.

The Pennsylvania house bill is similar to the Vermont bill in that it prohibits all “covenants not to compete,” with the exception of those that arise from the sale of a business or the dissolution of a partnership or limited liability company. However, Pennsylvania’s HB 1938 defines the “covenant not to complete” as an agreement between an employer and an employee that discourages the employee from seeking employment elsewhere.

As a result, non-disclosure and non-solicitation agreements are outside the ban. HB 1938 also includes a clause that relates to judicial recourse and choices of law and venue.

If an employee files a lawsuit against their employer, and wins, the bill includes a provision that allows the employee to recover attorney fees and damages, including punitive damages. HB 1938 does not offer any recommendations for the standards that should be used to determine whether damages should be awarded. In addition, it does not offer guidance on the amount of damages the employee should receive if punitive damages are awarded.

Additional Bill Provisions

HB 1938 also requires all non-compete cases that involve a Pennsylvania resident be decided upon in a Pennsylvania court under Pennsylvania law. This means that the parties involved may not negotiate an alternate venue, or a conflicting choice of law.

In addition, parties may not file in federal court, even if the conditions for federal jurisdiction are met. The only other states that have non-compete bans as broad as Vermont and Pennsylvania propose to enact are California, North Dakota, and Oklahoma.

The last action on this bill was referral to the Pennsylvania General Assembly’s Labor and Industry committee, where it has remained for over a year.

Philadelphia Employment Lawyers at the Law Offices of Sidkoff, Pincus & Green P.C. Represent Employees in Non-Compete Cases

If you were required to sign a non-compete agreement, and you have questions about how that impacts your employment, it is in your best interest to contact the Philadelphia employment lawyers at Sidkoff, Pincus & Green P.C. We will address all of your questions and concerns, including the enforceability of a restrictive covenant. Our skilled legal team will protect your rights and secure the maximum financial compensation you deserve. To schedule a confidential consultation, call us today at 215-574-0600 or contact us online. Our offices are conveniently located in Philadelphia, where we serve clients in Pennsylvania, South Jersey, and across New Jersey.