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The Pennsylvania Supreme Court has taken up a dispute between two trucking companies that could potentially close down an avenue employers often use to keep competition at bay—or it could open up even more.

The justices granted allocatur in Pittsburgh Logistics Systems v. Beemac Trucking on July 24 to determine the validity of no-hire provisions—also known as no-poach agreements—in contracts between companies.

Earlier this year, an en banc Pennsylvania Superior Court panel, after rehearing argument in a case of first impression, voted 7-2 to affirm a Beaver County Court of Common Pleas decision upholding a nonsolicitation provision in the contract between Pittsburgh Logistics Systems and Beemac Trucking, but refusing to enforce a no-hire provision. Last March, a split three-judge Superior Court panel ruled the same way.

Judge Paula Francisco Ott, writing for the majority en banc as she did for the three-judge panel, said the trial court was correct to invalidate the no-hire provision.

“The trial court determined the no-hire provision would violate public policy by preventing persons from seeking employment with certain companies without receiving additional consideration for the prohibition, or even necessarily having any input regarding or knowledge of the restrictive provision,” Ott said. “Additionally, the trial court reasoned the no-hire provision was overly broad in that the enforceable no-solicitation provision between PLS and Beemac sufficiently protected PLS from the loss of its clients, which was the ultimate purpose of all the relevant restrictions. Based upon the nature and limitations of our review, we agree with the trial court.”

“Employment restrictions are valid, in certain circumstances, in contracts between employer and employee,” Ott continued. ”As a general rule, those restrictions are in place, in an agreement between the employer and employee, at the time of initial employment. When a new restriction is added, to be enforceable, that restriction must be supported by additional consideration.”

Ott added, “If additional restrictions to the agreement between employer and employee are rendered unenforceable by a lack of additional consideration, PLS should not be entitled to circumvent that outcome through an agreement with a third party.”

Ott was joined in the majority by Judges John Bender, Alice Dubow, Susan Peikes Gantman, Jack Panella, Victor Stabile and Anne Lazarus.

Attorney Denis Dice, who is not involved in the case but has extensive experience representing employers in contractual disputes, said he believes a decision by the Supreme Court to validate no-hire provisions would mostly be impactful because of its potential to bolster the argument in favor of another prevalent contractual device: the noncompete clause.

“That would be a pretty major shift in Pennsylvania for sure,” said Dice, managing partner of Winget, Spadafora & Schwartzberg's Philadelphia office.

The reason, he said, is that noncompete agreements between employers and their employees are currently “almost impossible to enforce in Pennsylvania” state court because they're widely viewed as unfair, one-sided restrictions on an employee's ability to earn a living.

“When you walk in to the courtroom to enforce a noncompete, the first thing the judge says is, 'Who's the guy trying to prevent this guy from going to work?'” Dice said, adding, “It pretty much goes downhill from there.”

But the ability to point to a Supreme Court ruling validating no-hire provisions would add significant heft to the argument that noncompetition agreements, which employees voluntarily enter into, should likewise be deemed valid, he said.

Of course, that's assuming the justices overturn the Superior Court's ruling in Pittsburgh Logistics Systems, which Dice said he doesn't think is likely.

A. Christopher Young, chairman of the franchise, distribution and marketing section of the Pepper Hamilton's trial and dispute resolution practice group also isn't involved in the case but, like Dice, has watched it closely. He said given that restraints on trade are generally disfavored in Pennsylvania, he also doesn't expect the Supreme Court to fully embrace no-hire provisions. But, he added, the justices could take a more nuanced approach, as suggested by Superior Court Judge Mary Jane Bowes in her dissenting opinion in the case.

Bowes, joined in her dissent by Judge Mary Murray, said she found the U.S. District Court for the Middle District of Pennsylvania's reasoning in its 2010 ruling in GeoDecisions v. Data Transfer Solutions “particularly persuasive.” In that case, the federal court found that a restraint on trade such as a no-hire provision should be deemed enforceable if it meets the following criteria: “(1) it is ancillary to the main purpose of a lawful transaction; (2) it is necessary to protect a party's legitimate interest; (3) is supported by adequate consideration; and (4) it is reasonably limited in both time and territory.”

Regardless of how the justices ultimately rule, Young said, “it will be good just to get certainty from the Supreme Court about how they're going to treat these,” particularly since they arise in contexts other than just service contracts, including merger & acquisition agreements.

William Stickman of Del Sole Cavanaugh Stroyd represents PLS. Paul Steinman of Eckert Seamans Cherin & Mellott represents Beemac. Neither responded to requests for comment on the allocatur grant.