Total Articles: 13
PA Court Finds No-Hire Clause Between Businesses Invalid
In a precedent-setting move late last week, the Superior Court of Pennsylvania held a no-hire provision appearing in a contract between a Pittsburgh logistics company and a trucking company invalid as an unfair restriction on trade. Lately, antitrust suits – especially those targeting businesses with no-poach/no-hire agreements – have become more and more prevalent as the U.S. Department of Justice and the Federal Trade Commission pledge to crack down on violators. Even more troubling is the private plaintiff’s bar has its own interests in pursuing these cases: guaranteed attorney’s fees and treble damages. That’s right, even the most minimal of cases can result in paid attorney’s fees and triple the computed damages. A number of franchises have already been hit by these suits including Papa Johns, Burger King, and Cinnabon.
Pennsylvania’s Proposed “Freedom to Work Act” Aims to Join California in Banning Non-Compete Agreements
Late last year, Pennsylvania legislators introduced House Bill 1938, the “Freedom to Work Act” (the “Act”), an outright ban on “covenant[s] not to compete” in Pennsylvania. Under the Act, “a covenant not to compete is illegal, unenforceable and void as matter of law.”
Consideration Required to Bind Existing Employees to Noncompetes, Pennsylvania Supreme Court Holds
The Pennsylvania Supreme Court has ruled that a non-compete signed during the course of employment, without additional consideration, is not enforceable even though the agreement stated that the parties “intend to be legally bound.” Socko v. Mid-Atlantic Systems of CPA, Inc.
Consideration Required to Bind Existing Employees to Noncompetes, Pennsylvania Supreme Court Holds
n employee is not bound by a noncompete agreement signed during the course of his employment if he was not offered additional consideration, even though the agreement expressly stated the parties “intend to be legally bound,” the Pennsylvania Supreme Court has held in a 4-1 decision. Socko v. Mid-Atlantic Systems of CPA, Inc., No. 142 MAP 2014 (Nov. 18, 2015).
Pennsylvania Supreme Court Holds Uniform Written Obligations Act Does Not Allow Employer To Enforce Noncompete Unsupported By Consideration
In Socko v. Mid-Atlantic Systems of CPA, Inc. (No. J-40-2015), the Pennsylvania Supreme Court ruled on an issue of first impression: whether the state’s Uniform Written Obligations Act (“UWOA”) allows employers to enforce a noncompete given to an employee while already employed without providing consideration. On November 18, 2015, the high court affirmed a Pennsylvania Superior Court’s May 2014 decision, ruling that without valuable consideration, noncompetes are unenforceable.
Pennsylvania Still Requires Separate Consideration for Restrictive Covenant Agreements
In a much anticipated decision released on November 18, 2015, the Supreme Court of Pennsylvania closed the door—if it was ever open—on any arguments doing away with the separate consideration required for restrictive covenant agreements entered into after the commencement of employment. In Socko v. Mid-Atlantic Systems of CPA, Inc., the Commonwealth’s supreme court reaffirmed the claim that Pennsylvania’s decades-old Uniform Written Obligations Act (UWOA) does not change the long-standing common law rule that covenants not to compete entered into after the commencement of employment must be accompanied by new and valuable consideration.
Pennsylvania Supreme Court Finds That UWOA Language Does Not Waive Right to Challenge Adequacy of Consideration for Restrictive Covenant
On November 18, 2015, in a highly anticipated decision, the Pennsylvania Supreme Court held that employers could not use the language set forth in Pennsylvania’s Uniform Written Obligations Act (“UWOA”) to avoid providing adequate consideration for a restrictive covenant signed by an employee. In Socko v. Mid-Atlantic Systems of CPA, Inc., the Court considered whether a non-compete agreement signed by Socko with Mid-Atlantic following the commencement of Socko’s employment was enforceable despite Mid-Atlantic’s failure to provide any benefit or change in employment status at the time of execution, by virtue of the parties’ statement in the agreement that they “intend to be legally bound” by its terms.
Pennsylvania Supreme Court Holds Uniform Written Obligations Act Does Not Allow Employer To Enforce Noncompete Unsupported By Consideration
In Socko v. Mid-Atlantic Systems of CPA, Inc. (No. J-40-2015), the Pennsylvania Supreme Court ruled on an issue of first impression: whether the state’s Uniform Written Obligations Act (“UWOA”) allows employers to enforce a noncompete given to an employee while already employed without providing consideration. On November 18, 2015, the high court affirmed a Pennsylvania Superior Court’s May 2014 decision, ruling that without valuable consideration, noncompetes are unenforceable.
Continued Employment is Insufficient Consideration for Non-Compete Agreement in PA.
In general, contracts “in restraint of trade” have been considered to be illegal. One exception under most state laws is the “Non-Compete Agreement,” wherein an employee agrees – typically upon being hired – not to compete with his/her employer for a reasonable period of time after that employment relationship ends. This restriction, however, typically is disfavored by the Pennsylvania Courts because it is viewed to limit the employee’s professional mobility.
A Costly Change: Violation Of a Non-Solicitation Clause Results In a Multi-Million Dollar Award
A recent ruling entered in Pennsylvania state court is a stark reminder to employers and employees about the dangers associated with violating post-employment restrictive covenants such as non-compete and non-solicitation provisions. The case, captioned as B.G. Balmer & Co. Inc. v. Frank Crystal & Co., centered around the question of whether a group of insurance brokers violated the non-solicitation clause in their employment agreements with Balmer. The group of departing employees first began to consider switching insurance brokers from Balmer to Crystal when they individually met with a recruiter in May 2003. Only a few months later, in July 2003, the group of employees all resigned from Balmer on the same day in order to start working for Crystal. Subsequent to their collective departure, approximately twenty clients switched insurance brokers from Balmer to Crystal.
Court Enjoins Lawyer From Competing and Soliciting Clients of Former Law Firm
A Philadelphia County state court judge recently issued a preliminary injunction in favor of a law firm against a former associate enforcing a 60-day notice provision.
You’re Fired!! And Don’t Forget Your Non-Compete!
Many people believe that an employer cannot enforce a non-compete agreement against an employee whom it has fired without cause. For years, many have cited two Pennsylvania Superior Court decisions to support this contention. But the Pennsylvania Superior Court just weighed in with a new opinion stating that courts must consider factors extending beyond whether and why the employee was fired. In short, Pennsylvania courts can no longer reflexively find non-competes unenforceable simply because an employee was terminated.
Third Circuit sets forth the criteria to support the imposition of an injunction related to a non-compete agreement.
Non-competition, confidentiality, and non-solicitation agreements all are examples of restrictive covenants that are used to preclude an employee from taking certain proprietary information or customers and using it (or them) in a way that may adversely affect the individual’s previous employer. When a company determines that a former employee may be prepared to violate such an agreement, it often will ask the court for injunctive relief that can include ordering the individual to refrain from taking certain actions over the period of time during which the validity of the restrictive covenant is determined. The 3d U.S. Circuit Court of Appeals recently vacated a district court’s preliminary injunction, finding that the lower court insufficiently evaluated and supported its decision to enforce a noncompetition agreement