Recently in Non-Competition Category

July 1, 2013

No non-compete in the offer letter, but here's a way to enforce one...

You're hiring for an engineer position. To assist, you engage a search firm, which finally locates an ideal candidate. After a telephone conversation, and a subsequent tour and in-depth interview, you know that you have the right person for the job. So, you prepare and send an offer letter.

The offer letter includes a summary of the position, responsibilities, location, base salary, benefits, effective date, and confidentiality. The letter also states: "You will also be asked to sign our employment/confidentiality agreement. We will not be able to employ you if you fail to do so. In addition, the first day of employment you will be required to sign an Employment Agreement with definitive terms and conditions outlining the offer terms and conditions contained herein."

The offer letter does not contain any mention of a non-competition agreement.

Your candidate signs and returns the offer letter. On his start date, you ask the candidate to sign an employment/confidentiality agreement, which does contain a non-competition restrictive covenant. The candidate reads and understands the non-competition covenant, signs it without objection, and goes to work for you.

If, a few years later, this employee decides to leave to work for a competitor, will that non-competition agreement be enforceable? Or will you be out of luck because the offer letter said nothing about it?

According to this recent opinion from the PA Supreme Court, you're a-ok.

That is, there are enough elements to the offer letter to show that the letter is evidence of negotiation and not a contract itself: (i) it was intended to summarize the position; (ii) it references a subsequent employment/confidentiality agreement; and (iii) it confirms that the definitive terms in the employment agreement will control.

Plus, because the restrictive covenant at issue was contained within the employment agreement, it was ancillary to the taking of employment and therefore supported by consideration.

The PA employer here got lucky. Don't make the same mistake. If you're in PA and you want an employee to enter into a non-competition agreement as a condition of initial employment, reference it in the initial offer letter and have that employee sign a separate non-competition agreement immediately upon commencing employment with the company. Also, don't overreach. Make sure that the restrictive covenant is carefully tailored in time and geographic scope to protect your legitimate business interests.

June 25, 2012

Employer customer lists: "Whatever you say, dude."

See, Hear and Speak No EvilYou're looking to hire a new salesperson. Scott Salesperson comes in to interview. He currently works for your top competitor.

"Scott, do you have a non-competition agreement?"

"No."

"Scott, do you have a confidentiality agreement?"

"No. In fact, I have a list of my own customers that I could sell to if you hire me."

Sounds good, right. But, before hiring Scott, do you have any obligation to independently verify the facts that Scott has represented?

New Jersey employers will definitely want to click through because, last week, the New Jersey Supreme Court answered...

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Continue reading "Employer customer lists: "Whatever you say, dude."" »

June 1, 2011

Is a non-compete agreement signed months after work begins enforceable?

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I was reading a blog post from Jennifer L. Gokenbach at the Colorado Employer's Law Blog, discussing how, as of yesterday, Colorado deems continuation of at-will employment to be sufficient consideration to support a non-competition agreement. In non-lawyer speak, that means that if an employee signs an agreement not-to-compete in Colorado after the employee starts working, on the condition that if the employee does not sign the agreement then the employee will be fired, the employer may later enforce that agreement.


That's now the law in Colorado. Is that also the law in PA, NJ, and DE?

Delaware: Yes. Research & Trading Corp. v. Powell, 468 A.2d 1301, 1305 (Del.Ch.1983).

New Jersey: Yes. Hogan v. Bergen Brunswiq Corporation, 153 N.J.Super. 37, 378 A.2d 1164 (App.Div. 1977).

Pennsylvania: No. An agreement not to compete with a former employer must be supported by new consideration; i.e., a change in the conditions of employment (e.g., a raise, promotion, or other financial benefit). Maintenance Specialties, Inc. v. Gottus, 455 Pa. 327, 314 A.2d 279, 280 (Pa. 1974).

Continue reading "Is a non-compete agreement signed months after work begins enforceable?" »

April 19, 2011

Misclassifying an employee may void a non-compete agreement

In an unpublished opinion, the Third Circuit Court of Appeals denied a Pennsylvania company's attempt to enjoin a former employee, who had entered into several restrictive covenants with the company, to compete directly against the company and solicit its customers.

What did this employer do wrong and how can you learn from its mistakes?

After the jump...

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Continue reading "Misclassifying an employee may void a non-compete agreement" »

January 19, 2011

4 ways employers can protect themselves when employees leave

This story that I wrote with my Dilworth Paxson LLP colleague, David Laigaie, the Chair of Dilworth's Corporate Investigation/White Collar Group, recently appeared in The Legal Intelligencer. If you operate a business in Pennsylvania and you have trade secrets, employees with non-solicitation agreements, or non-competition agreements, then take a few minutes and read this article. You'll be glad you did.