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.