KingSpry | Pennsylvania Superior Court Promotes Employees’ Ability to Change Jobs

Pennsylvania Superior Court Follows National Trend of Promoting Employees’ Ability to Change Jobs

Posted on February 7th, 2019
by Ellen C. Schurdak

In Pittsburgh Logistics Systems, Inc. v. BeeMack Trucking, LLC, Pittsburgh Logistics Company sought a preliminary injunction to enforce a contractual no-hire provision it had with BeeMack Trucking.

The no-hire provision prevented BeeMack, during the term of the contract and for two years after its termination, from hiring or soliciting for employment or inducing or attempting to induce any employees of Pittsburgh Logistics Systems, Inc. to leave their employment and work for BeeMack Trucking, LLC. 

After four Pittsburgh Logistics Systems, Inc. employees went to work for BeeMack, Pittsburgh Logistics Systems sued to enjoin BeeMack from continuing to employ them.

The Court’s Decision

At a preliminary injunction hearing, the trial court held that the no-hire provision in the underlying contract constituted an unenforceable restraint of trade.  The trial court reasoned that this contractual provision violated public policy and was, therefore, void.  Pittsburgh Logistics Systems, Inc. appealed the case to the Superior Court.

In a split ruling dated January 11, 2019, the Superior Court’s majority opinion affirmed the trial court’s decision. The Superior Court majority opinion essentially adopted the trial court’s ruling by holding that the no-hire provision in the underlying contract was, as a matter of public policy, void.  In so holding, the Superior Court’s majority opinion referenced similar rulings from out-of-state courts.

The Superior Court’s dissenting judges opined that the majority opinion incorrectly treated the contractual no-hire term as equivalent to an employee restrictive covenant.  The dissenting judges referenced prior, appellate court decisions in which restraints on trade, even when ancillary to different types of sales agreement, were enforced.

In reaching their opinion, the dissenting judges adopted the test used by the Middle District Court in the Eastern District of Pennsylvania.  This test held that no-hire provisions in commercial contracts were enforceable when:  (1) they are ancillary to the main purpose of a lawful transaction; (2) necessary to protect a party’s’ legitimate interests; (3) supported by adequate consideration; and (4) reasonable in both time and geography.

What This Means For Employers

It is unknown whether the case will be appealed to the Pennsylvania Supreme Court and, if appealed, whether the Pennsylvania Supreme Court will decide to hear the case. Unlike the initial appeal to the Superior Court, the Pennsylvania Supreme Court selects which cases it reviews. The Superior Court’s decision, as written, questions whether no-hire contractual provisions are ever enforceable under Pennsylvania law.  If the case is not successfully appealed to the Pennsylvania Supreme Court, there will undoubtedly be future litigation on similar no-solicitation terms in contracts.

As an aside, in the Pittsburgh Logistics Systems, Inc. case, the individual employees had no solicitation provisions within their underlying contract with their employer, Pittsburgh Logistic Systems, Inc.  However, a different court had found these employer/employee contracts to be overly broad and unenforceable.  It is unknown whether this prior court’s ruling influenced the Superior Court’s majority opinion, but, it is clear that the national trend is for courts to disfavor no-hire contract provisions.

In light of the Superior Court’s recent decision, employers should carefully review any non-solicitation provisions they have and consult an attorney knowledgeable in this area of the law.

 

The Eastern Pennsylvania Employment Log (EPELog) is a publication of the KingSpry Employment Law Practice GroupJeffrey T. Tucker, Esquire, is our editor-in-chief. EPELog is meant to be informational and does not constitute legal advice.