Pennsylvania Non-Compete Agreement

Introduction

Key Things to Know

1. 1

   A non-compete agreement is a contract in which one party, usually an employee, agrees not to compete with a business for a set time and area after the relationship ends. In Pennsylvania an employee non-compete is enforceable if it is reasonable.

2. 2

   Pennsylvania has no general non-compete statute. Courts decide enforceability under a common-law test: the covenant must be incident to the employment, supported by adequate consideration, reasonably limited in duration and geography, and designed to protect a legitimate business interest of the employer (Hess v. Gebhard & Co., 570 Pa. 148, 808 A.2d 912 (2002); Sidco Paper Co. v. Aaron, 465 Pa. 586, 351 A.2d 250 (1976)).

3. 3

   Pennsylvania has no general salary or income threshold that turns a non-compete on or off. Enforceability turns on the reasonableness test, not on how much the employee earns, so do not treat any dollar figure as a live threshold or import another state's number.

4. 4

   To be reasonable, a Pennsylvania non-compete must protect a legitimate business interest, such as trade secrets or customer relationships, not simply block competition, and its duration and geography must be no broader than necessary. Courts in Pennsylvania have generally been more willing to uphold restrictions of about one to two years tied to where the employer actually competes, but there is no fixed cap.

5. 5

   Pennsylvania is strict on consideration. Signing at the start of a job is usually enough, but for an existing employee continued employment alone is not sufficient consideration; the employer must give something new, such as a raise, bonus, or promotion. In Socko v. Mid-Atlantic Systems of CPA, Inc., 633 Pa. 555, 126 A.3d 1266 (2015), the court held that a Uniform Written Obligations Act statement of intent to be legally bound does not substitute for consideration.

6. 6

   Pennsylvania courts apply blue-penciling: an overbroad covenant can be narrowed to a reasonable time, area, and scope rather than voided entirely (Sidco Paper Co. v. Aaron; WellSpan Health v. Bayliss, 869 A.2d 990 (Pa. Super. 2005)). Health care practitioners get special protection under the Fair Contracting for Health Care Practitioners Act (Act 74 of 2024, effective January 1, 2025).

7. 7

   Because a non-compete may be narrowed or not enforced, Pennsylvania employers often protect confidential information through a confidentiality or non-disclosure agreement and the Pennsylvania Uniform Trade Secrets Act (12 Pa.C.S. Section 5301 et seq.) rather than relying only on a non-compete.

Pennsylvania Requirements for Non-Compete Agreement

• Enforceable If Reasonable

  In Pennsylvania an employee non-compete is enforceable if it is reasonable. There is no general non-compete statute, so courts decide enforceability under a common-law test: the covenant must be incident to the employment, supported by adequate consideration, reasonably limited in duration and geographic extent, and designed to protect a legitimate business interest of the employer (Hess v. Gebhard & Co., 570 Pa. 148, 808 A.2d 912 (2002); Sidco Paper Co. v. Aaron, 465 Pa. 586, 351 A.2d 250 (1976)). A clause that is too broad or aimed only at blocking competition can be held unenforceable.

• No Salary Threshold

  Pennsylvania has no general enacted salary or income threshold that decides whether a non-compete is enforceable. Enforceability turns on the common-law reasonableness test, not on how much the employee earns. The only pay-independent occupation limit is the Fair Contracting for Health Care Practitioners Act for covered clinicians, which is an occupation rule, not a salary floor. Do not rely on any other state's salary figure when the worker is in Pennsylvania.

• Adequate Consideration Required

  Pennsylvania is strict on consideration. Signing a non-compete when a job starts is usually enough, but for an existing employee continued employment alone is not sufficient; the employer must give new, valuable consideration such as a raise, bonus, promotion, or a beneficial change in job status. In Socko v. Mid-Atlantic Systems of CPA, Inc., 633 Pa. 555, 126 A.3d 1266 (2015), the Pennsylvania Supreme Court held that a Uniform Written Obligations Act recital of intent to be legally bound does not substitute for actual consideration.

• Legitimate Interest and Reasonable Scope

  A Pennsylvania non-compete must protect a legitimate business interest, such as trade secrets, confidential information, customer goodwill, or specialized training, and keep its duration and geography no broader than necessary. Courts in Pennsylvania have generally been more willing to uphold restrictions of about one to two years tied to the area where the employer actually competes, but there is no fixed cap for ordinary employees and each clause is judged on its facts.

• Courts May Blue-Pencil Overbroad Clauses

  Pennsylvania applies blue-penciling. A court may narrow an overbroad covenant's duration, geography, or scope to what is reasonable and enforce the rest, rather than voiding it entirely (Sidco Paper Co. v. Aaron, 465 Pa. 586, 351 A.2d 250 (1976); WellSpan Health v. Bayliss, 869 A.2d 990 (Pa. Super. 2005)). Courts narrow or strike unreasonable, severable terms but will not rewrite the agreement wholesale, so drafting narrowly from the start is safer than relying on a court to fix it.

• Health Care Practitioner Limits (Act 74 of 2024)

  Pennsylvania's Fair Contracting for Health Care Practitioners Act (Act 74 of 2024, enacted from HB 1633, effective January 1, 2025) prohibits enforcing certain non-compete covenants against covered health care practitioners, including physicians, doctors of osteopathy, certified registered nurse anesthetists, certified registered nurse practitioners, and physician assistants. As reported by counsel guidance, such a covenant is enforceable only if it runs one year or less and the practitioner left voluntarily, and is unenforceable if the employer dismissed the practitioner. Re-confirm the section-level text before relying on a clinician non-compete.

• No General Notice Statute

  Pennsylvania has no general statute requiring advance notice or a waiting period before an ordinary employee signs a non-compete. The load-bearing requirement is adequate consideration, not notice: an existing employee must receive a new benefit for the covenant to be supported. Employers often present the covenant together with the offer, raise, or promotion that supplies that consideration, and keep the time and geographic limits reasonable so the clause survives review.

• Protect Trade Secrets Instead

  Because an overbroad non-compete may be narrowed or not enforced, Pennsylvania employers often protect confidential information with a confidentiality or non-disclosure agreement and the Pennsylvania Uniform Trade Secrets Act (12 Pa.C.S. Section 5301 et seq.). This protects trade secrets and customer data without a broad restraint on where a former employee may work, and is often more durable than a non-compete. The 2024 Federal Trade Commission non-compete rule was set aside by a court before it took effect and is not currently binding, so Pennsylvania law controls.