Pittsburgh, PA
Firm Alert
(by Steve Silverman and Katerina Vassil)
Employers who want to protect their trade secrets and goodwill can use several types of restrictive covenants to limit departing employees from harming them in future employment. Two of the most common are non-competition (non-compete) and non-solicitation (non-solicit) provisions that can be included in employment agreements. These provisions are often confused by employers and thought to be equally enforceable, but in practice they are not. The following addresses the differences between these two types of restrictions, their respective limitations on enforcement, and why an employer may want to use one over the other, or even both.
Non-competes restrict a former employee’s ability to work for a competitor or start a competing business within a specific time frame and geographic area. Courts are hesitant to uphold non-compete agreements that overly restrict an employee’s ability to engage in work opportunities within their profession. Non-compete agreements are upheld so long as they are of reasonable duration, geographic scope, and necessary to protect legitimate business interests. If a non-compete agreement is overly broad and fails to identify legitimate business interests to be protected, courts will often refuse to enforce them. A reasonable geographic scope limitation is essential to a non-compete because of the nature of the business interest that the agreement seeks to protect.
Conversely, non-solicit agreements allow ex-employees to work for competitors but restrict them from soliciting customers and clients of the former employer for a specified time period. Non-solicit agreements do not typically include explicit geographic limitations. Instead, geographic limitations implicitly exist in non-solicit agreements based on where the specific customers or clients are located. If these customers and clients are scattered in various locations, an explicit geographic limitation could make the non-solicit agreement overly restrictive and provide insufficient protections for the former employer. …