Pennsylvania Superior Court Rules in Favor of Employee in a Covenant Not to Compete Case Because Company had no Protectable Business Interest in Information Available in the Public Domain

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In Wolfington Body Company, Inc. v. O’Neill, the Pennsylvania Superior Court found in favor of the employee, Defendant O’Neill, holding that the covenant not to compete, which Wolfington Body Company made O’Neill sign as a condition of his employment agreement, was unduly restrictive and overly broad. Wolfington Body Company, Inc. v. O’Neill, 2018 WL 2011398 (Pa. Super. 2018).

O’Neill began working for Wolfington Body Company in the fall of 2013 as a commercial vehicle sales person. Once hired, Wolfington required O’Neill to sign an Employment Agreement which contained several restrictive covenants including Non-Compete and Non-Solicitation Covenants. These covenants included language which restricted where O’Neill could work once he left Wolfington, and how long he must wait before working in the bus sales industry again. The covenant restricted O’Neill from working in any state which Wolfington is conducting or has conducted business. This restriction functionally prohibited O’Neill from working in the 35 states in which Wolfington has or had done business. In addition, the covenant not to compete prohibited O’Neill from working for two years in the bus sales industry after he left Wolfington. In the fall of 2016, O’Neill left Woflington and began working for another company in the bus sales industry. Wofington brought a suit alleging that O’Neill violated the restrictive covenants of his Employment Agreement, specifically that the O’Neill had access to Wolfington’s confidential, proprietary, or trade secretes which are legitimate business interests worthy of protection. O’Neill t testified that based on his long employment history in the bus sales industry, he had compiled information including a customer base, and price estimates for building busses.  However, O’Neill asserted that he returned all confidential information to Wolfington before ending his employment.

In analyzing whether to enforce a restrictive covenant, the Court looks to see if, “… it must be reasonably related to the protection of a legitimate business interest… including trade secretes or confidential information, unique or extraordinary skills, customer good will, and investments in an employee specialized training program. In contrast, a post-employment covenant that merely seeks to eliminate competition per se to give the employer an economic advantage is generally not enforceable.”  For a restrictive covenant to be enforceable, there must be the presence of a legitimate protectable business interest.  Once it is established that a legitimate protectable business interest is present, the court applies a balancing test weighing the employer’s protectable business interest against the employee’s interest in earning a living. Then the court balances the employer and employee interests against the interest of the public.

Here, the Court found that the information necessary to enable an experienced sales person to perform their job are readily available in the public domain, therefore the information retained by O’Neill was of no secret value or of any peculiar importance to Wolfington. Additionally, the definition of confidential information set forth in the employment agreement was overly broad and included any information that O’Neill may have learned while working for Wolfington thus, the restrictive covenant was not reasonably tailored to protect Wolfington’s business interests. For a restrictive covenant to be enforced there must be the existence of legitimate business interest, and the restrictive covenant must be reasonably tailored to protect the employer’s interests.  Wolfington failed to establish that the restrictive covenant was reasonably tailored, even if there were legitimate business interests at stake worth protecting. Since neither of these two necessary factors are present, the Court found in favor of O’Neill.

Philadelphia non-compete lawyers at Sidkoff, Pincus & Green P.C. protect employees’ right to work. For assistance in any type of employment law matter, call 215-574-0600 to schedule a consultation in our Philadelphia office, where we represent clients in Pennsylvania and New Jersey, or contact us online.

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PA District Court Invalidates Non-Compete for Lack of Adequate Consideration and Enforces Original Agreement

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In Allied Orthopedic Assoc. v. Leonetti, Civil Action No. 18-01566, 2018 WL 4051801 (E.D. Pa. August 24, 2018), Plaintiff successfully enjoined Defendant from violating a non-compete agreement the two parties previously entered into. Plaintiff in this case is a manufacturer’s representative that sells medical equipment. Defendant was hired by Plaintiff in 2008 as a sales associate and executed a non-competition, non-solicitation and confidentiality agreement. Among other things, the non-compete stated that “[e]mployee agrees that he/she will not, directly or indirectly, at any time while employed by [Plaintiff] and within eighteen months (18) months after termination with Plaintiff, with or without cause, make any independent use of, or disclosure to any person other than an employee at [Plaintiff’s company].” In 2010, Defendant signed another series of non-competition, non-solicitation and confidentiality agreements and was “essentially promoted”. Defendant resigned in 2018 and began working for a local competitor of the Plaintiff. Plaintiff brought suit alleging breach of contract, tortious interference with contractual relations, tortious interference with business relations and violation of Pennsylvania’s Uniform Trade Secrets Act and civil conspiracy.

Defendant initially contended that the agreements entered into in 2010 controlled rather than the original non-compete signed in 2008. The Court found the 2010 non-competition agreements were “not supported by adequate consideration” and thus not valid. In Pennsylvania, in order for a non-competition covenant to be enforceable, it must related to a contract for employment, be supported by adequate consideration and be reasonably limited in both time and territory.  Since the consideration, which was the “promotion”, was not contemplated in the agreement, the 2010 agreement was not valid and the 2008 agreements controlled. As to the validity of the 2010 non-compete agreements, the Defendant did not dispute that the non-compete was incident to the employment relationship with Plaintiff or that the eighteen-month duration of the non-competition provision was excessive. Rather, Defendant attempted to argue that the territorial limit of the non-competition agreement was overreaching and unfair. The Court concluded that the recent downsize of Plaintiff’s company, which shrunk their commercial activity to Delaware, Philadelphia and the Philadelphia suburbs, limits the restrictions in the non-compete agreement to those specific areas. Therefore, since Defendant was working within the Philadelphia area, he was in breach of the non-competition agreement.

Philadelphia non-compete lawyers at Sidkoff, Pincus & Green P.C. protect employees’ right to work. For assistance in any type of employment law matter, call 215-574-0600 to schedule a consultation in our Philadelphia office, where we represent clients in Pennsylvania and New Jersey, or contact us online.

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Proposed Changes to the Minimum Required Salary for Pennsylvania White-Collar Overtime Exemptions

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On June 23, 2018, the Pennsylvania Department of Labor and Industry (“DLI”) proposed major rule changes to the Pennsylvania Minimum Wage Act (“PMWA”). The PWMA is the state version of the Fair Labor and Standards Act (“FLSA”), which creates minimum wage and overtime rules for employers.

The most significant proposed change involves the minimum salary level pertaining to the white-collar exemption. For an employer to avoid paying overtime to salaried employees, the employee must meet both the “Duties Test” and the minimum salary level. As it currently stands, the FLSA requires salary employees under the white-collar exemption to be paid at least $455 per week or $23,660 annually. The proposed regulation to the PMWA would change this minimum salary level to: $610 per week or $31,720 annually effective on the date the final rule is published in the Pennsylvania Bulletin; $766 per week or $39,832 annually effective one year after the publication of the final rule; and $921 per week or $47,892 annually effective one year later.

In addition to the proposed changes to the minimum required salary, the DLI also proposed changes to the “Duties Test”, which explains what job duties an employee must perform to qualify under the white-collar exemptions. However, the proposed rule changes do not mirror the FLSA regulations when it comes to the test and will presumedly create confusion for employers trying to comply with both the FLSA and PMWA. For example, certain exemptions such as the computer professional or highly compensated employee exemptions are recognized under the FLSA but not under the proposed change to the PMWA.

The DLI states within the proposal that these changes are needed to more closely align with federal regulations, and because the minimum salary levels in Pennsylvania have not been updated in 40 years and fail to keep pace with economic growth.

Philadelphia overtime dispute lawyers of Sidkoff, Pincus & Green are highly skilled business and employment litigators with experience representing employees with overtime claims under the Fair Labor Standards Act. Call 215-574-0600 today or submit an online contact form to arrange a consultation.  Our office is located in Philadelphia, Pennsylvania and we represent clients throughout the Philadelphia and South Jersey regions.

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PA District Court Holds that Employer Had Legitimate Nondiscriminatory Reason for Termination in Age Discrimination Case

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In Terrell v. Main Line Health, Inc., Civil Action No. 17-3102, 2018 WL 2462005 (E.D. Pa. June 1, 2018) Plaintiff, an employee at Defendant’s Hospital for thirty-five years, was terminated from her position as operating room secretary. Plaintiff alleges that her employer terminated her because of her age. Defendant countered and argued that Plaintiff was terminated for a legitimate, nondiscriminatory reason. Specifically, Defendant alleged that Plaintiff accessed information regarding a co-worker in violation of Defendant’s polices relating to patient privacy and in violation of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). Plaintiff filed a complaint against Defendants with the Equal Opportunity Employment Commission (“EEOC”) and the Pennsylvania Human Rights Commission (“PHRC”). Defendants ultimately moved for summary judgment.

To succeed on an age discrimination claim based on disparate impact, a plaintiff must demonstrate that age “was the ‘but-for’ cause of the employer’s adverse decision.” In age discrimination cases, it is not sufficient to simply show that age was “a motivating factor” in the adverse employment action. Rather, a plaintiff must demonstrate that age was a determinative factor or “the ‘but for’ cause of the employers adverse decision.” Age discrimination may be established by direct or indirect evidence. Regardless of the method of proof, “the plaintiff retains the burden of persuasion to establish that age was the ‘but-for’ cause of the employer’s adverse actions. To establish a prima facie case of discrimination in ADEA cases, the plaintiff must show (1) that the plaintiff was forty years of age or older; (2) that the defendant took an adverse employment action against the plaintiff; (3) that the plaintiff was qualified for the position in question; and (4) that the plaintiff was ultimately replaced by another employee who was sufficiently younger to support an inference of discriminatory animus. Plaintiff successfully established a prima facie case of age discrimination.

Accordingly, the burden shifted to Defendant to produce a legitimate nondiscriminatory reason for termination. Defendant then produced the evidence that Plaintiff twice accessed information regarding a co-worker in violation of Defendant’s polices relating to patient privacy and in violation of the HIPAA. Therefore, the burden went back to Plaintiff to establish the proffered reason was merely pretext.

Plaintiff did not challenge the allegation that she accessed information regarding co-workers. Rather, she argued that a factfinder could disbelieve Defendants’ articulated legitimate reason for terminating her because her “two business-related data accesses absolutely do not fall into the categories of conduct required for termination.” The Court ultimately ruled that Plaintiff failed to raise a triable issue of fact as to whether the proffered reason for her termination were pre-textual and that Defendants were entitled to summary judgment.

For more information, call our employment discrimination lawyers in Philadelphia at the Law Offices of Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

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Eastern District of Pennsylvania Rules in Favor of Store Owner in Slip and Fall Case

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In Harrell v. Pathmark, the Eastern District of Pennsylvania ruled that a store owner was not negligent in slip and fall. 2015 U.S. Dist., LEXIS 23154* (E.D. Pa. 2015). The plaintiff in this matter, Ms. Harrell, was severely injured when she slipped on a wet floor in the Philadelphia Pathmark Store.

Under Pennsylvania law, in order for a store owner to be held liable in a slip and fall action, the owner must have known about, or by the exercise of reasonable care would have discovered, a condition that involved an unreasonable risk of harm. This standard requires the plaintiff to prove that the owner either played a role in creating the dangerous condition or that the owner had actual or constructive notice of the harmful condition.

Constructive notice must be determined on a case-by-case basis because it is drawn from “the existence of facts and circumstances that a party had a duty to take notice of.” The relevant factors courts consider when determining constructive notice include: the nature of the dangerous condition; its location on the premises; its cause (or likely cause); the opportunity of the defendant to remedy the condition; and most importantly, the time elapsing between when the dangerous condition arose and when the accident occurred.” The amount of time plays such a critical role in determining notice because if the dangerous condition only existed for a very short time before the incident then, even by the exercise of reasonable care, the owner would not discover the hazardous condition.

The Court determined that Ms. Harrell was not able to provide any evidence of how the water got onto the floor, how long the water had been on the floor, or if Pathmark employees had any knowledge of the water. Furthermore, the fact that Pathmark did not follow a set cleaning or inspection schedule did not provide the sufficient evidence of constructive notice. Therefore, due to the lack of evidence presented, the Court concluded that Pathmark did not have constructive notice of the hazardous condition, and thus, was not liable for her injuries.

For more information, please call our Philadelphia business lawyers at the Law Office of Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

PA Superior Court Analyzes Extent of Limited Immunity for Physicians under the MHPA

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On July 2, 2018 the Superior Court of Pennsylvania provided clarification to the extent of limited immunity provided to health care providers who treat mentally ill patients under the Mental Health Procedures Act (“MHPA”). Dean v. Bowling Green-Brandywine, 2018 PA Super 196 (Pa. Super. 2018). The MHPA was designed to provide limited civil and criminal immunity to “individuals and institutions providing treatment to the mentally ill.” Under the MHPA a physician providing treatment to a mentally ill person may only be found liable if they committed “gross negligence.” The claim against Bowling Green Brandywine Treatment Center (“Brandywine”) was brought by the parents of a patient who voluntarily admitted himself for treatment to deal with addiction to painkillers. Within ten days of being admitted the patient was found unresponsive on the floor of his room suffering from cardiac arrhythmia. After being transported to an emergency care facility the patient died. The parents’ medical experts opined that Brandywine committed gross negligence by failing to provide adequate care that would have made Brandywine aware that the patient was at considerable risk for cardiac arrest due to the medications in his system. The trial court held that all the doctors involved had limited immunity under the MHPA and granted a nonsuit against all defendants.

On appeal the parents argued that their son’s drug addiction was not dispositive by itself as to whether he suffered from mental illness, to which the court agreed. The court then went on to analyze whether care provided by Brandywine could be deemed to fall under the MHPA. The Superior Court found that for the first several days of treatment the patient was not classified as a mentally ill patient. However, two days prior to the patient’s death he had been seen for psychiatric care at Brandywine wherein a physician identified him as suffering from mood disorders and prescribed him medication. Consequently, even if the doctors were negligent by failing to identify the cardiac arrest risk, they were still protected by limited immunity as such error was not grossly negligent and the patient was deemed mentally ill.

For more information, call our Philadelphia business lawyers in Philadelphia and South Jersey at the Law Office of Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

Eastern District Court Rules that Uber Drivers are Not Employees under the FLSA

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On April 11, 2018, the United States District Court for the Eastern District of Pennsylvania found that Drivers working for Uber Technologies Inc.’s car service failed to show that they are employees. Razak v. Uber Technologies, Inc., 2018 U.S. Dist. LEXIS 61230, 2018 WL 1744467 (E.D. Pa., April 11, 2018). Plaintiffs filed claims against Uber Technologies Inc. (“Uber”) for violations of the federal and state minimum wage and overtime requirements. They claimed that Uber violated the Fair Labor Standards Act (FLSA), the Pennsylvania Minimum Wage Act (PMWA), and Pennsylvania Wage Payment and Collection Law (WPCL). The Court held that the Plaintiffs did not qualify as “employees” under either the state or federal statutes and granted Uber’s motion for summary judgment.

The Court found that the Plaintiffs did not bring sufficient evidence to support their burden of showing that they were “employees” as required by the FLSA. To determine whether Plaintiffs were employees, the Court assessed the facts under the Donovan factors which are: “(1) the degree of the alleged employer’s right to control the manner in which the work is to be performed; (2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; (4) whether the service rendered requires a special skill; (5) the degree of permanence of the working relationship; and (6) whether the service rendered is an integral part of the alleged employer’s business.” The Court’s analysis was based on the totality of the circumstances, and no one factor was dispositive in the classification of a worker as an employee or an independent contractor.

The Court found that the only factors weighing in Plaintiffs favor were the fourth “special skills” factor and the sixth “integral part factor.” However, considering the elements in totality, the Donovan factors strongly favored Plaintiffs classification as independent contractors rather than employees given their ability to create their own schedules, choose where they want to work, and that they had the freedom to attend to personal matters while not in service. Therefore, the Plaintiffs were unable to meet their necessary burden, and the Court ruled in favor of Uber in granting its Motion for Summary Judgment.

For more information, call our Philadelphia employment lawyers for Fair Labor Standards Act in Philadelphia and South Jersey at the Law Office of Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

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Eastern District of Pennsylvania Rules Against Plaintiff’s Tortious Interference in Prospective Contractual Relation Claim

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In UniStrip Technologies, LLC v. LifeScan, Inc. and LifeScan Scotland, Ltd. the Eastern District of Pennsylvania determined that Plaintiff had not met its burden of proof for its claim of tortious interference with prospective contractual relation. 153 F.Supp.3d 728 (E.D. Pa. 2015). The necessary elements of a cause of action for tortious interference with prospective contractual relations are as follows: (1) The existence of a prospective between the complainant and a third party; (2) purposeful action on the part of the defendant to harm the existing relation, or to prevent a prospective relation from occurring; (3) the absence of privilege or justification on the part of the defendant; and (4) the occasioning of actual damage as a result of defendant’s conduct.

The Court found that UniStrip failed to establish the first prong of this four-factor test. The first requirement of there being a prospective contractual relationship can be satisfied by demonstration of “something more than mere hope” that a contract will be formed. UniStrip was unable to convince the Court that there was a reasonable probability that a contract would arise.  UniStrip’s claim rested on the argument that it would have engaged in contractual relations with numerous buyers but for LifeScan’s contracts with them threatening to revoke rebates and discounts if they purchased UniStrip products. UniStrip argued that LifeScan’s conduct was without any business justification and caused significant financial harm by discouraging potential buyers from doing business with UniStrip. The Court held that UniStrip could not identify a “specific business relationships suffering as a result of defendant’s interference” and thus dismissed UniStrip’s claim.

For more information, call the Philadelphia business lawyers at The Law Office of Sidkoff, Pinus & Green, P.C. today at 215-574-0600 or contact us online.

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Third Circuit Splits from Other Circuit Courts in Age Discrimination Suit

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On January 10, 2017, the Third Circuit ruled in favor of a group of fired employees (“Employees”) over age 50 in an age discrimination suit under the Age Discrimination in Employment Act (“ADEA”).  Karlo v. Pittsburgh Glass Works, LLC, 849 F.3d 61 (3d Cir. 2017). The Employees sued Pittsburgh Glass Works LLC (“Employer”) claiming that a layoff of 100 workers disproportionately affected employees who were 50 and over. The lower court refused to allow evidence from Employees relating to the disparate impact of a subgroup of those 50 and over because it did not establish any discriminatory effect on the entire class of workers, those 40 and over, and thus was counterproductive to a claim under the ADEA. The Third Circuit reversed the lower court’s ruling and found in favor of Employees thus splitting from other circuit courts, which have found that disparate treatment of employees within the protected class is not a viable claim under the ADEA.

The Third Circuit reversed the lower court’s decision because it viewed the practical implications of the case differently, and, more importantly, it had a different interpretation of the text of the ADEA. First, the Court interpreted the ADEA as prohibiting discrimination based on an employee’s age, not on the employee being a member of the protected class of people aged 40 or older. This finding is contrary to the other circuit courts which focused on the ADEA’s protection of a protected class of people aged 40 or older, not the protection of variably aged individuals within that protected class. Second, the Third Circuit found that preventing the protection of individuals within the protected class merely due to policy reasons, such as employer liability, is equivalent to trying to amend the ADEA. Further, the Court asserted that its opinion reflects the desires of Congress as clearly stated in the text of the ADEA to protect those aged 40 and older from age discrimination by employers.

For more information, call our employment discrimination lawyers in Philadelphia at The Law Offices of Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

Third Circuit Holds Computer Manufacturer Could Not Pierce Corporate Veil of Insolvent Corporate Buyer

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In Clientron Corp. v. Devon IT, Inc., 2018 WL 3293212 (3rd Cir. 2018), the Third Circuit Court of Appeals found that Appellant failed to establish under Pennsylvania law that shareholders were alter ego of Appellee and thus Appellant was not entitled to pierce Appellee’s corporate veil as reparations for a business tort. In addition, the Court held that the corporate veil could not be pierced as a discovery sanction against one shareholder to hold him personally liable for part of the judgment.

Appellant, a computer component manufacturer brought action against an insolvent Pennsylvania corporation seeking to enforce a $6.5 million arbitration award obtained in Taiwan pursuant to the Pennsylvania Uniform Foreign Money Judgment Recognition Act (“UFMJRA”). The District Court for the Eastern District of Pennsylvania declined to pierce the corporate veil to hold shareholders jointly liable thereby erasing the $6.5 million award obtained by manufacturer. The manufacturer appealed.

Although Pennsylvania law recognizes a strong presumption against piercing the corporate veil, factors weighing in favor include: “failure to observe corporate formalities, non-payment of dividends, insolvency of the debtor corporation at the time, siphoning of funds of the corporation by the dominant shareholder, non-functioning of other officers or directors, absence of corporate records, and the fact that the corporation is merely a façade for the operations of the dominant stockholder or stockholders.”

Appellant attempted to show that shareholders use of credit cards for personal use, loans from Appellee to individual shareholders, and money transfers to personal accounts of shareholders’ other companies amounted to a lack of adhering to corporate formalities. The Court found, however, that the evidence was insufficient because “lack of formalities in a closely-held corporation does not often have as much consequence as where other corporations are involved”. Therefore, the Court held that Appellants evidence was insufficient to overcome Pennsylvania’s strong presumption against piercing the corporate veil.

The Philadelphia business lawyers at The Law Offices of Sidkoff, Pincus & Green represent clients is all areas of business law. Contact us online or call us at 215-574-0600.