Noncompete laws in Pennsylvania are making a lot of headlines. In a noncompete agreement, an employee agrees not to take a job with one of your competitors or start a competing business for a certain time after they leave their job. It can be part of an employment contract or a separate agreement.
At the federal level, the FTC under the Biden administration attempted to ban all noncompetes in the US. That effort came to an end in the court system, at least for now. At the state level, Pennsylvania continues to strictly enforce them in certain circumstances. There have also been some changes to noncompete laws in PA in 2025 for healthcare employers.
Here's what you need to know to keep your business compliant:
Noncompete agreements are enforceable in Pennsylvania. However, the court system applies strict standards to them. To be enforceable in Pennsylvania, an agreement must be:
Legitimate business interests would include the protection of trade secrets, customer relationships, or proprietary or specialized training. As for geographic scope and duration, the restrictions must not be broader than what is needed to protect the employer's interests.
The "adequate consideration" standard is trickier to explain. Without adequate consideration, the courts will not enforce a PA noncompete. The term refers to something of real value that the employee must receive when they agree to the noncompete restrictions.
If the noncompete is presented to the employee before or at the start of employment, the job itself is regarded as adequate consideration for it. If the agreement is introduced after the job starts, the employee must be offered a new consideration in exchange for the agreement. This could be a promotion, a raise, a bonus, new benefits, or something else.
The Pennsylvania Supreme Court affirmed in 2020 that continued employment is not enough on its own. In that case (Rullex Co. v. Tel-Stream, Inc.), the Supreme Court ruled that a noncompete clause was unenforceable because it was offered to an employee two months after the job had commenced. The employee hadn't been offered any new consideration before agreeing to the restrictions.
As of January 1, 2025, Pennsylvania has banned noncompete agreements for healthcare professionals. The Fair Contracting for Health Care Practitioners Act (Act 74) limits the use of noncompetes for Pennsylvania physicians, physician assistants, nurse practitioners, psychologists, and other professionals offering direct patient care. Noncompetes for these professions that were entered on or after January 1 are considered void and unenforceable if they:
Even if an employer terminates a practitioner for cause, the noncompete agreement cannot be enforced under the new law.
The Federal Trade Commission (FTC) under the Biden administration proposed a rule in April 2024 that would have banned most noncompetes in the US. The rule was set to take effect in September 2024, but it was blocked by a federal court in Texas. Under the Trump administration, the FTC has thus far made no moves to appeal the ruling. It's widely believed that the FTC will not pursue implementation of the nationwide ban, although nothing has been made public.
Pennsylvania employers should keep in mind that state law still governs the enforceability of noncompetes. All agreements must meet the state's standards for reasonableness and consideration. Healthcare employers must be mindful of the Act 74 changes that are now in effect.
Here are some frequent mistakes that can make a noncompete unenforceable in Pennsylvania.
If you're concerned that noncompete agreements in Pennsylvania are too risky or restrictive, some more targeted tools may be better options. These can offer strong protection while staying inside Pennsylvania's legal guardrails:
These alternatives are more enforceable under state law. Part of the reason why the FTC ban on noncompetes was halted was that the rule was simply too broad. These tools strike a better balance between fairness for employees and protection for employers. They are more narrowly tailored while protecting specific business interests like client relationships and proprietary data.
Audit Existing Contracts: An audit can help ensure that your noncompetes comply with state law. This is especially true for healthcare employers in 2025.
Avoid Generic Language: Language in noncompetes should be tailored to restrictions on the employee's role and your needs as an employer.
Reconsider Necessity: Noncompetes may not be necessary for every role. NDAs or non-solicits can offer safer, more effective protection.
Talk to Legal Counsel: Your legal counsel can keep you apprised if there are any changes to the FTC rule status or to Pennsylvania ddemployment standards.
Update Onboarding/Offboarding Practices: Updating these practices can help you catch compliance issues early.
Exact Payroll can help your business navigate these evolving noncompete laws with confidence. Our HR tools ensure that employment terms are clearly documented from day one, reducing ambiguity and protecting your organization. If legal concerns come up, we can connect you with trusted legal resources to clarify your risks and obligations.
We stay ahead of state and federal employment law changes so you don't have to. We're here to make sure your onboarding and termination policies stay fully compliant through the lifecycle of every employee.
Ready to simplify compliance in this shifting legal landscape? Connect with Exact Payroll today for expert support, before small oversights turn into big liabilities for your business.
The information provided in this article is for general informational purposes only and does not constitute legal advice. While we strive to keep content accurate and up to date, laws and regulations may change. Readers should consult with qualified legal counsel for guidance specific to their business or situation.