No Poach Agreements – Revisited

Pennsylvania now has some guidance from its courts regarding the enforcement of no poach agreements within the state. The Pennsylvania Superior Court issued a decision on January 11, 2019 in Pittsburgh Logistics Systems, Inc. v. BeeMac Trucking, LLC,[1] serving as the first appellate level court within the state to address the issue of no poach agreements. The result—no poach agreements are generally void for violating public policy.

No poach agreements are contracts between employers not to hire employees from each other’s companies. They are most notorious in the fast food industry among various franchises, but can appear in other industries as well. For more information on no poach agreements in other industries and the current battle with various states’ attorneys general, see the article No-Poach Agreement Investigations: What Businesses Need to Know.

In the specific instance in Pittsburgh Logistics Systems, Pittsburgh Logistics Systems (PLS) had an agreement with BeeMac Trucking that prevented BeeMac from hiring or soliciting any of PLS’s employees. After BeeMac nevertheless hired four of PLS’s former employees in violation of the agreement, PLS brought suit to enforce the agreement and prevent BeeMac from retaining PLS’s former employees. PLS did not tell its employees about the agreement with BeeMac, and its employees were given no additional benefit from the company in exchange for refraining from working for BeeMac in the future.

Before the Pittsburgh Logistics case, there was no existing law addressing whether no poach agreements between contracting employers were enforceable in Pennsylvania. It had, however, been long established that restraints on trade and restraints on an employee’s ability to earn a living were contrary to public policy and thus void in other contexts. The Superior Court viewed PLS’s contract with BeeMac as a restraint on trade since PLS’s employees were unaware of the agreement. The court held that the PLS-BeeMac contract “essentially force[d] a non-compete agreement on employees of [the] compan[y] without their consent, or even knowledge[.]” Since the employees could not make up their own minds if they wanted to be subject to the restriction, it would be fundamentally unfair to enforce the agreement to their detriment. The court therefore declined to grant PLS’s requested relief and further held that no poach agreements are generally void as violative of public policy.

The court did note that similar employment restrictions might be valid in an agreement between an employer and employee (similar to a non-compete agreement) if they were supported by actual consideration. Furthermore, the Superior Court agreed with the trial court that PLS was adequately protected by the non-solicitation provisions of the agreement, which prevented any former employee of PLS from contacting customers of PLS during the term of the agreement and for one year thereafter. Despite this caveat, the court made it clear that no poach agreements are highly disfavored in Pennsylvania and will likely be unenforceable as void for violating public policy. Any employers with no-poach agreements currently in effect should therefore carefully consider alternative options to protect their interests.

With contribution from Sarah Rothermel, J.D. Widener Law Commonwealth.

[1] Pittsburgh Logistics Systems, Inc. v. BeeMac Trucking, LLC, 202 A.3d 801 (Pa. Super. 2019).

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