PA Introduces Bill to Ban Restrictive Covenants in Employment Agreements

Restrictive covenants – noncompetition and nonsolicitation agreements between an employee and an employer – are challenging to draft and enforce. 

In November 2017, the Pennsylvania House of Representatives introduced legislation (H.B. 1938) that would ban “all covenants not to compete” with a few exceptions:  those that relate to the owner of a business, the dissolution of a business, and some “reasonable” covenants that were in place prior to the effective date of the newly proposed law. The House co-sponsorship memoranda articulates a variety of reasons why restrictive covenants are not in the best interest of either the Commonwealth or its employees, and thus violate public policy.

The bill also adds an attorney fees provision that would allow an employee to recover attorney fees and damages – including punitive damages -- if he or she prevails in a lawsuit against an employer related to the enforcement of a restrictive covenant. 

The PA bill has not yet been scheduled to go before the House Labor and Industry Committee, but it is certainly something to watch.