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Restrictive Covenants in the Third Circuit

By Siri Rao & Julia Milewski on April 22, 2019
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In the Third Circuit, common law generally governs the use of restrictive covenants. States in this Circuit employ a reasonability standard to determine whether a restrictive covenant is enforceable. In New Jersey, even if a covenant is found to be reasonable, it may be limited in its application by: geographical area, period of enforceability or its scope of activity. Pennsylvania also uses common law to determine if a restrictive covenant is enforceable but restrictive covenants are generally disfavored.

State
Law governing restrictive covenants
Restrictive covenants in employment agreements will be enforced:
Delaware

Common Law

 

See TP Group CI, Inc. v. Vetecnik, 2016 WL 5864030 (D.Del. Apr. 14, 2016).

Delaware law recognizes employment restrictive covenants when such covenants:
  1. Adhere to general principles of contract;
  2. Are reasonable in scope and duration;
  3. Advance the legitimate economic interests of the party enforcing the covenant; and
  4. Survive balance of the equities.
New Jersey

Common Law

 

See Jiffy Lube Intern., v. Weiss Bros.,Inc., 834 F.Supp. 683 (D.N.J. 1993).

A restrictive covenant will generally be found reasonable where it:
  1. Protects the legitimate interest of the employer;
  2. Imposes no undue hardship on the employee; and
  3. Is not injurious to the public.
Pennsylvania

Common Law

 

See Freedom Medical Inc. v. Whitman, 343 F.Supp.3d 509 (E.D.Pa. 2018).

Restrictive covenants are permitted under Pennsylvania, if:
  1. They relate to a contract for employment;
  2. Are supported by adequate consideration; and
  3. The application of the covenant is reasonably limited in both time and territory.
Photo of Siri Rao Siri Rao

Siri Rao is an associate in Crowell & Moring’s Washington, D.C. office. She is a member of the firm’s Intellectual Property Group. She received her J.D. from The George Washington University Law School in 2017, where she was a member of the American…

Siri Rao is an associate in Crowell & Moring’s Washington, D.C. office. She is a member of the firm’s Intellectual Property Group. She received her J.D. from The George Washington University Law School in 2017, where she was a member of the American Intellectual Property Law Association Quarterly Journal. During law school, Siri interned at the International Trade Commission and the U.S. Court of Federal Claims, Office of Special Masters. She received the law school’s Pro Bono Recognition Award at graduation for contributing more than 100 hours of pro bono legal services during her time in law school. Prior to law school, Siri worked as a research assistant at the Food and Drug Administration in Silver Spring, MD. Siri earned her B.S. in biomedical engineering from The George Washington University.

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Photo of Julia Milewski Julia Milewski
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  • Posted in:
    Intellectual Property, Privacy & Data Security
  • Blog:
    Trade Secrets Trends
  • Organization:
    Crowell & Moring LLP
  • Article: View Original Source

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