Restrictive covenants are generally disfavored in Pennsylvania as they constitute a restraint on trade that also undercuts a former employee’s ability to earn a living. . . .[citations omitted] That principle is tempered to some degree by the recognition that, in the modern business environment, such covenants can be “important business tools” which prevent individuals from “‘learning [employers’] trade secrets, befriending their customers and then moving into competition with them.’” . . . .
To be enforceable, a restrictive covenant must be incident to an employment relationship between the parties and supported by consideration; also, its restrictions must be reasonably necessary for the protection of the employer’s legitimate interests and reasonably limited in duration and geographic extent. [citations omitted] . . . .
A bright-line rule such as that utilized by the Superior Court [concerning the necessity of new consideration] could subvert the expectations of parties who fully anticipate and intend the restriction to be ancillary to the taking of employment, but the employee, for whatever reason, signs the covenant shortly after the first day. Alternatively, such an approach might unnecessarily delay an employee’s ability to begin earning income if he or she is not in a position to sign the agreement until a reasonably short period after work begins.
Hence, the test for whether new consideration is required has not ordinarily centered on whether the employee physically executed the agreement precisely on (or before) the first day of employment. Rather, and as explained, restrictive covenants have been deemed enforceable absent fresh consideration in situations where the parties contemplated and intended that, incident to the employment relationship, the employee would be bound by its substantive terms – and the employee ultimately signed it shortly after the first day.
This is in contrast with circumstances where a non-compete agreement is imposed on an employee essentially as a belated addition to the employment relationship. See generally Jordan Leibman & Richard Nathan, The Enforceability of Post-Employment Noncompetition Agreements Formed After At-Will Employment Has Commenced: The “Afterthought” Agreement, 60 S. CAL. L.REV. 1465, 1472 (1987) (referring to these as “afterthought agreements”). In Maintenance Specialties, Inc. v. Gottus, 455 Pa. 327, 314 A.2d 279 (1974), for example, this Court found a non-compete clause unenforceable where it was not in the original, oral employment contract, but appeared when the contract was reduced to writing the next year and was unsupported by new consideration. See id. at 330, 314 A.2d at 281.
From the foregoing it should be evident that, for a restrictive covenant executed after the first day of employment to be enforceable absent new consideration, the parties must have agreed to its essential provisions as of the beginning of the employment relationship. Only in that circumstance will the covenant in substance be “ancillary to taking employment[.]” Pulse Techs., Inc. v. Notaro, 620 Pa. 322, 327, 67 A.3d 778, 781 (2013) (quoting Beneficial Finance, 422 Pa. at 534, 222 A.2d at 875).
In this respect, [the employee] argues that, as with other types of agreements, there must be a meeting of the minds on the terms of [the] restrictive covenant. Thus, before preliminary negotiations ripen into contractual obligations, there must be evidence of mutual assent to the terms of a bargain. If “the parties themselves contemplate that their agreement cannot be considered complete, and its terms assented to, before it is reduced to writing, no contract exists until the execution of the writing.” . . . . In making an assessment along these lines, it may not be necessary to prove an actual, subjective “meeting of the minds,” as objective manifestations of assent and/or an intent to be bound by the covenant’s substance can suffice.
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