Pennsylvania Superior Court Rejects No-Hire Agreements Between Competitors
Civil Litigation Update, a publication of the Pennsylvania Bar Association
By: Erin K. Aronson, Esq.
In Pittsburgh Logistics Systems, Inc. v. Beemac Trucking, LLC, 202 A.3d 801 (Pa. Super. 2019) (Opinion by Ott, J.), the Pennsylvania Superior Court, on a matter of first impression, held that a no-hire provision in an agreement between two entities is an unenforceable “unfair restraint on trade.” The trial court refused to enforce provisions of an agreement between two companies that prohibited one from hiring or soliciting the other company’s employees for employment. The court concluded that the provision violated public policy.
On appeal, the Pennsylvania Superior Court affirmed. The court noted that employment restrictions might be valid in an agreement between an employer and employee, where such restrictions are supported by actual consideration. By contrast, the no-hire provision at issue in Pittsburgh Logistics Systems limited employees’ options without any consideration provided to them and without their consent. The court credited the trial court’s determination that “these types of no-hire contracts should be void against public policy” in part because the affected employees may not even be aware they exist. In the absence of any Pennsylvania ruling on this issue, the trial court relied on Richards Energy Compression, LLC v. Dick Glover, Inc., 2013 WL 12147626 (D.N.M. 2013) for its persuasive value, which likewise condemned the practice of subjecting an employee to “servitude” without their knowledge or consent.
In the wake of Pittsburgh Logistics Systems, employers may continue to rely on restrictive covenants in employment agreements, but cannot resort to no-hire agreements with competitors.