To answer your question, it depends. And in Pennsylvania, there are a lot of factors that a court will consider, based on a recent case decided by the Pennsylvania Superior Court. But, unlike many prior Pennsylvania decisions that deal with the enforceability of a non-competition agreement after an employee is fired, this recent decision focuses on a non-solicitation agreement.
Read on to find out whether the non-solicitation agreement that an employees signs with your company is still enforceable if you decide to end the employment relationship.
The case is In another case about which I wrote recently, the Third Circuit held that an employer could enjoin its former employee who had never signed any non-competition or non-solicitation agreements from working for a competitor where the former employee had access to important trade secrets and could later share those trade secrets with a competitor. The Third Circuit decision involved proprietary formulas and processes. Missett focused on client lists which, under Pennsylvania law, often receive trade secret protection too. So this decision is a victory for companies who downsize by laying off salespeople, especially those that have their salespeople sign multiple restrictive covenants over time.
Other tips for employers who seek to enforce non-solicitation agreements after a layoff:
- Pigs get fed and hogs get slaughtered. So, keep the non-solicitation period to two years or less.
- Along those same lines, a former employer should think twice before trying to enforce a non-solicitation agreement against an employee who wants to maintain customer relationships that the employee brought to the former employer.
- Offer the employee a severance — some additional consideration — and have that employee sign a severance agreement in which the employee reaffirms that he/she will abide by restrictive covenants.
None of these tips are “slam dunk” winners. But they should increase the chances of enforceability. Another option is gardening leave. What is gardening leave, you ask? It’s a period of time during which the current employer pays an employee to stay out of the office. During the “gardening leave” the employee remains employed with the current employer, so all restrictive covenants remain in full force and effect. The idea is that by the time the gardening period is over, many trade secrets (e.g., client lists) will become stale and the non-solicitation threat is effectively abated. For some recent insight on gardening leave, check out NonCompeteNews.com.