Assignability of Covenants Not to Compete Under Pennsylvania and Ohio Law

Covenants not to compete are often included in many employment agreements. Covenants not to compete provide employers with a useful and effective way of protecting their intangible assets, such as customer goodwill and confidential and trade secret information. Covenants help to ensure that an employer's assets are not jeopardized and used to their competitive disadvantage as employees leave and go to work for a competitor.

In recent years, as companies have been bought and sold, merged and liquidated, there has been a question of whether covenants not to compete signed between an employee and one company can be assigned to another company. Pennsylvania and Ohio have answered this question differently. Pennsylvania has held that unless an employment agreement contains a specific assignability clause or the employee consents to the assignment, a covenant not to compete cannot be assigned. In contrast, Ohio has a more lenient approach to assignability, with courts holding that contracts with covenants not to compete may be assigned even absent a specific assignability provision.