Back in December of last year, I wrote a piece about a relatively recent Superior Court of Pennsylvania case which held that a covenant not to compete is not enforceable against a key salesperson who left his employer to work for a competitor. The primary reasoning behind the Court's decision was that the underlying agreement was not signed at the outset of the salesperson's employment with his employer and the employer did not provide him with any additional benefits or consideration at the time he signed the agreement. As the foundation for my piece, I referenced a May 2014 article authored by my colleague John Gotaskie which summarized the key findings in the case. I also noted that during the week prior to my piece being published, the Pennsylvania Supreme Court agreed to hear an appeal of the Superior Court's decision and that the final outcome of the case remains open.
Lucky for us, John continues to stay on top of this case and summarizes the key issues to be heard on appeal in another piece he published last week. The focus of the appeal will be to determine whether Pennsylvania's Uniform Written Obligations Act allows the enforcement of a restrictive covenant against an employee even without his or her employer providing additional consideration. In other words, will the Supreme Court allow the mere fact that an employee knowingly signs and intends to be legally bound by a restrictive covenant agreement serve as a substitute for the seemingly well-established requirement that an employer must either have its employees sign this type of agreement at the outset of their employment or provide them with some specific and additional consideration (for example, cash and/or a job promotion) at the time of signing?
While I doubt that the Supreme Court will answer this question with a blanket "yes", I can't be sure. More importantly, as John notes, the factors to be considered by the Supreme Court may suggest that they have doubts about the basis for the Superior Court's original decision.
Please be sure to check back to see how this case unfolds, but for now the lesson remains the same. Be prepared to pay your employees unless you have them sign a restrictive covenant agreement at the outset of their employment.
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