Consideration A Must For Noncompete Covenant
A noncompete covenant or agreement with an employer may be challenged for a lack of consideration under the Uniform Written Obligations Act, the Pennsylvania Supreme Court has ruled, even if the agreement indicates that the parties “intend to be legally bound.”
In a 4-1 decision published Nov. 18 in Socko v. Mid-Atlantic Systems of CPA, the majority affirmed Superior Court and trial court rulings that said a noncompete covenant between plaintiff David Socko and his former employer, Mid-Atlantic Systems of CPA, was unenforceable because Mid-Atlantic failed to offer Socko any benefit or change in job status.
“Upon consideration of the historic background regarding covenants not to compete, their relative positive and negative impact upon the employer-employee relationship, and their unique treatment in the law, including more rigorous scrutiny by our courts, we conclude that a construction of the UWOA which would vitiate the need for new and valuable consideration when entering into an agreement containing a restrictive covenant after the initiation of employment would be unreasonable,” Justice Debra M. Todd wrote for the majority.
Reference: Lizzy McLellan, Pennsylvania Law Weekly, (December 1, 2015)
Filed Under: Restrictive Covenants; Lack of Consideration
Kindly visit our Business Law & Business Litigation websites for more information on this topic. For more questions and concerns on this case, we have the experienced lawyers at Pozzuolo Rodden, P.C.Law Firm.