It is not uncommon for a party to a significant commercial transaction to agree not to hire any employees of the other party for a specific period of time. However, are such agreements enforceable?
In the case in question, the defendant, through a “no-hire provision” in a contract with the plaintiff, agreed that during the contract and for a period of two years following the contract’s termination, it would not hire any of the plaintiff’s employees. But, while the contract was in force, the defendant hired four of the plaintiff’s employees. The plaintiff filed a lawsuit and sought an injunction.
Ultimately, the case reached the Supreme Court of Pennsylvania. As with most states, Pennsylvania disfavors restrictive covenants. A contract that limits competition or employment opportunities is void if the restriction is greater than needed to protect a party’s legitimate interest or the party’s needs are outweighed by the hardship caused or the restriction will injure the public. In this case, the court ruled that the agreement in question was, in fact, unenforceable because it unreasonably limited competition and restrained employees without providing the employees anything of value in exchange for the restraint.
The opinion is notable because it is the first Pennsylvania case to rule on the enforceability of a no-hire provision between two commercial businesses. The ultimate impact of the ruling will emerge in time. Please feel free to contact me if you would like more information about the case (Pittsburgh Logistics Systems, Inc. v. Beemac Trucking, LLC) or no-hire agreements.
PLEASE NOTE: This blog is merely for the general interest of the reader. It is not legal advice or opinion and it does not create an attorney-client relationship. Please call me at 973-921-0600 if you’d like to have a free initial telephone consultation or learn more about me or my practice. Thank you.