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Non-Compete Clauses in FluxCustomarily, a business will include a provision not to compete or disclose confidential information in the contract of key employees in the event of resignation. It has the effect of discouraging defection and protects major accounts, proprietary knowledge and even the value of the business.Such clauses have long been enforceable in Pennsylvania if the "restrictive covenant" is reasonably limited as to time and area coverage. In October 2002, the Pennsylvania Supreme Court added a further qualification and ruled that sale of the assets of a business nullifies such restrictions, since covenants are personal in nature and were not specifically transferred. If the transfer of the business is by sale of the stock, the personal element may not be affected and the restriction may survive, although the Court did consider the effect of such transfers. To be safe, non-compete clauses should be specifically assignable by the employer, whether any transfer of the business is by the sale of assets or stock. If your business is faced with such a problem, check with your Peacock Keller attorney. |
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