Articles Discussing Restrictive Covenants In Pennsylvania.

A Pennsylvania company has dropped its challenge to the Federal Trade Commission’s (FTC) noncompete ban after a Pennsylvania federal judge denied the company’s bid to block the rule. The dismissal of the Pennsylvania lawsuit leaves the fate of the ban to potential appeals from two federal court decisions, one in

On July 23, 2024, Pennsylvania Governor Josh Shapiro signed the Fair Contracting for Health Care Practitioners Act (the “Act”), which bans certain noncompete covenants, including patient nonsolicitation provisions, between an employer and health care practitioner if the covenant is more than one year or the health care practitioner was “dismissed

On July 23, 2024, the U.S. District Court for the Eastern District of Pennsylvania in ATS Tree Services, LLC v. Federal Trade Commission, declined to block the Federal Trade Commission’s (FTC) final rule that would cause most non-compete agreements, with few exceptions, to be unenforceable (referred to as the “Non-Compete

Pennsylvania Governor Josh Shapiro has signed the “Fair Contracting for Health Care Practitioners Act” (House Bill 1633), which restricts the ability of employers and healthcare practitioners to enter into non-compete agreements. The Act goes into effect on Jan. 1, 2025.

In a recent decision and case of first impression, Pennsylvania’s Supreme Court unanimously affirmed that a no-hire of employees provision between a business and its vendor was unenforceable because it constituted an unreasonable restraint on trade. This continues a nationwide pushback against restrictive covenants and underscores that Pennsylvania strongly disfavors such restrictions unless they are narrowly tailored to protect a legitimate interest and do not harm the public, including innocent third parties.

In Pennsylvania, noncompetition agreements must, among other things, be supported by adequate consideration to be enforceable. It is well established that an initial offer of employment constitutes adequate consideration. It is also well established that a noncompetition agreement presented to an employee after the start of employment must be supported

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.

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.

In yet another example of an increasing willingness to enforce properly-drafted forum selection clauses in non-compete disputes, a federal judge in the Eastern District of Pennsylvania recently denied a motion to dismiss and motion for transfer of venue brought by the former franchisee defendants, a husband and wife. AAMCO Transmissions, Inc. v. Romano, No. 13-5747 (E. D. Penn. Aug. 21, 2014).

In Peter Zimmerman Architects, Inc. v. Toates, No. 3022 EDA 2013 (Aug.19, 2014), a firm specializing in custom, residential architecture sought to enforce a noncompetition agreement against a former employee and the new architectural firm he founded. As written, the noncompete would have prevented the former employee from (1) participating in the business of residential architecture for three years within an area extending 25 miles from the company’s office and (2) engaging in residential architecture for the renovation or new construction of one-of-a-kind properties for five years. The latter restriction had no geographic limit.

In a case of “first impression”, The Superior Court of Pennsylvania has ruled that a restrictive covenant entered into after employment has already commenced is unenforceable if not supported by separate valuable consideration. Socko v. Mid-Atlantic Systems of CPA, Inc., No. 1223 MDA 2013.

A U.S. District Judge in the Eastern District of Pennsylvania has allowed several claims to proceed to trial following a motion for summary judgment by defendants in Ozburn-Hessey Logistics, LLC v. 721 Logistics, LLC, et al, No. 12-0864 (April 4, 2014). The allegations in the case go beyond the typical defection of an employee or two to join a competitor.

In another example of out-of-state employers utilizing choice of forum and choice of law provisions to bind California employees to restrictive covenants, the Pennsylvania Superior Court recently held that a Pennsylvania choice of law and forum clause was enforceable as against a California resident.

In Best Medical International, Inc. v. Spellman, a federal court in Pennsylvania determined—in a case of first impression—that attorneys’ fees may be awarded to the prevailing defending party under the Pennsylvania Uniform Trade Secrets Act (“PUTSA”) when it has demonstrated:

When may attorneys’ fees be imposed on a plaintiff for prosecuting a claim for misappropriation of trade secrets in bad faith under the Pennsylvania Uniform Trade Secrets Act (PUTSA)? In a matter of first impression, in Best Medical International v. Spellman [pdf], a Pennsylvania district court held that bad faith justifies attorneys’ fees when two criteria are met: