Non-Competition Agreements in PA and the “Material Change” Doctrine

Non-compete clauses in employment contracts are enforceable and legal in Pennsylvania, as long as they reasonably protect the business’ interest and have reasonable duration and geographic restrictions. While in the past these types of agreements were largely limited to high-level executives, today these clauses are appearing in contracts across all levels of employment and industries.

As an employee, you may be wondering whether entering into such an agreement is the right move. The answer is it all depends on your individual circumstance. Younger employees just starting out or individuals contemplating opening their own business one day may want to avoid a non-competition agreement. While older employees in well-established employment situations where they are anticipating few changes, if the terms are reasonable, may not experience any adverse consequences.

Regardless, a non-competition agreement may become unenforceable if, after execution, the terms and conditions of employment are modified to the point where the parties have effectively abandoned the original employment agreement and entered into a new employment agreement. This is known as the “material change” doctrine. While significant changes to an employee’s job duties, work rules, territory, or compensation may constitute a material change, recent case law suggests that short-term or temporary changes in the absence of other changes do not constitute a material change of the original agreement.

Since the application of the material change doctrine is very fact-specific driven by multiple factors, to render an otherwise valid non-competition agreement unenforceable, anyone who has entered into such an agreement and is thinking about leaving their current employment situation should consult a highly qualified Employment Law attorney, to have their case evaluated and be properly advised of all their legal options.