Earlier this month, the Supreme Court of Pennsylvania decided that employers could not enforce overly broad no-hire clauses and non-compete agreements. The ruling on Pittsburgh Systems, Inc. v. Beemac Trucking determined that companies cannot block employees from taking jobs with other companies via non-compete agreements that are created in business contracts. This creates a new precedent that resembles similar rules in neighboring states, like New Jersey.
At the heart of this case was the contract the two companies signed in 2010 that made Pittsburgh Logistics Systems, Inc. a non-exclusive partner of Beemac Trucking to haul the freight of the former’s clients. Pittsburgh included non-solicitation and no-hire clauses, attempting to retain workers. However, Beemac still hired four of Pittsburgh’s employees. The Court ruled that this was acceptable, as the terms of the contract were too broad and did not directly involve the affected employees. This creates a risk to public harm and restraints on trade and free labor, which the Court determined outweighed any concern or interest Pittsburgh had for keeping their employees.
How Does This Ruling Affect Employee Rights?
In Pennsylvania, employees must consent to non-compete or no-hire clauses. Usually this happens when signing an initial employment contract. Employers must disclose the terms of the clauses upon entering the agreement. In this case, when the two companies entered their business contract in 2010, the employees of both were not parties to the deal. Without notifying the employees or gaining their consent, the non-compete agreement is voided. Had there been some input from the employees or some compensation promised by Beemac if they decided to hire Pittsburgh’s workers, that may have kept the contract clauses valid.
Since the language of the contract attempted to cover all of Pittsburgh’s employees, not just those working on matters related to Beemac and the business deal, the Court also found that to be too broad. The length of the non-compete clause, which extended two years beyond the established one-year term of the deal, was problematic.
The Court’s ruling put a spotlight on larger concerns, like the free competition for employees and the overall harm to the public. While acknowledging that Pittsburgh had an interest in retaining talent, the decision noted that the clauses enforced went beyond the scope of protecting that interest. Instead, it not only violated established state laws, but it created a probable harm to the public good. The Court determined restraining trade and limiting the labor market took importance over Pittsburgh’s interests as an employer.
This ruling could have significant impact as more people return to the workforce as the Coronavirus (COVID-19) shutdowns end and more businesses seek normalcy. While employers try to entice those unemployed back to jobs, this has started to create bidding wars that benefit workers.
For those offered new deals, it is important to scrutinize these contracts. Know the terms of employment, especially any non-compete agreements, that may preclude leaving for another position with better pay, conditions, or other arrangements.
Philadelphia Employment Lawyers at Sidkoff, Pincus & Green P.C. Help Negotiate Business Contracts for Workers
Contract negotiations can be confusing and stressful. Even for well-prepared professionals who know their values, there can be concerns. A trusted Philadelphia employment lawyer at Sidkoff, Pincus & Green P.C. can protect your interests. Call us at 215-574-0600 or contact us online to schedule an initial consultation. Based in Philadelphia, we proudly serve hard-working residents throughout Pennsylvania and New Jersey.