In Pittsburgh Logistics Systems, Inc. v. BeeMack Trucking, LLC, Pittsburgh Logistics Company sought a preliminary injunction to enforce a contractual no-hire provision it had with BeeMack Trucking.
The no-hire provision prevented BeeMack, during the term of the contract and for two years after its termination, from hiring or soliciting any employee of Pittsburgh Logistics Systems, Inc.
After four Pittsburgh Logistics Systems, Inc. employees went to work for BeeMack, Pittsburgh Logistics Systems sued to enjoin BeeMack from continuing to employ BeeMack’s prior employees.
Prior Court Decisions
At a preliminary injunction hearing, the trial court held that the no-hire provision in the underlying contract constituted an unenforceable restraint of trade. The trial court reasoned that this contractual provision violated public policy and was therefore void. Pittsburgh Logistics Systems, Inc. appealed the case to the Superior Court. In a split ruling dated January 11, 2019, the Superior Court’s majority opinion affirmed the trial court’s decision. The Superior Court majority opinion essentially adopted the trial court’s ruling by holding that the no-hire provision in the underlying contract was, as a matter of public policy, void. In so holding, the Superior Court’s majority opinion referenced similar rulings from out-of-state courts.
The Superior Court’s dissenting judges opined that the majority opinion incorrectly treated the contractual no-hire term as equivalent to an employee restrictive covenant. The dissenting judges referenced prior, appellate court decisions in which similar restraints were enforced. In reaching their opinion, the dissenting judges adopted the test used by the Middle District Court in the Eastern District of Pennsylvania. This test held that no-hire provisions in commercial contracts were enforceable when: (1) they are ancillary to the main purpose of a lawful transaction; (2) necessary to protect a party’s’ legitimate interests; (3) supported by adequate consideration; and (4) reasonable in both time and geography.
This case was appealed to the Pennsylvania Supreme Court. The Pennsylvania Supreme Court, in an order dated July 24, 2019 agreed to hear the following issue:
Are contractual no-hire provisions which are part of a services contract between sophisticated business entities enforceable under the law of this Commonwealth?
For now, the Pennsylvania Superior Court’s ruling continues to be the law in Pennsylvania. However, while it is clear that the national trend is for courts to disfavor no-hire contract provisions, it is currently unknown whether the Pennsylvania Supreme Court will follow other states in favoring employees’ rights or, based on contract law, find in favor of the employer.
The Eastern Pennsylvania Employment Log (EPELog) is a publication of the KingSpry Employment Law Practice Group. Keely Jac Collins is managing editor. EPELog is meant to be informational and does not constitute legal advice.
