A Pennsylvania court ruling illustrates why companies should take care in selecting which state law will govern their noncompete agreements with employees.
A company sued a former employee for violating a noncompete agreement. The agreement contained a choice of law provision stating that Pennsylvania law applied “to contracts entered into and performed in Pennsylvania.” The employee, however, lived and worked in California. The employee argued that because he did not work in Pennsylvania, his contract was not “performed in Pennsylvania.” The employee argued that California law should apply.
Under California law, noncompete agreements are enforceable after employment has ended in very limited situations. Pennsylvania law, by comparison, would be more favorable to the employer and more likely enforceable. In this case, the court ultimately determined that Pennsylvania law should be applied — thus giving the employer a fighting chance to make its case. For more, click here.
Companies that operate in multiple states or nationwide should take care not only in selecting which state’s laws will govern their contracts, but also in drafting their choice of law provision.