Every business has those key employees who you really do not want to lose. A common risk for this is when your customers see how well an employee performs and decides it would be even better to bring them in-house (cutting out you and your profit margin). Many businesses protect themselves against this risk with a “no-hire” clause in customer contracts where they agree not to poach employees from you. But that may no longer be possible here in Pennsylvania.
For many years, the courts of various states had reached different results as to whether “no-hire” clauses were void as a matter of public policy. But Pennsylvania’s appellate courts had never weighed in on the subject. The closest was a 2010 decision by a federal court here in Pennsylvania who predicted that Pennsylvania courts would permit such restrictions.
That all changed in the January 2019 decision by the Pennsylvania Superior Court in Pittsburgh Logistics Systems v. BeeMac Trucking. After acknowledging this was a new issue in Pennsylvania law and discussing the results reached by various states, the Court said:
We believe these types of no-hire contracts should be void against public policy because they essentially force a non-compete agreement on employees of companies without their consent, or even knowledge, in some cases. We believe that if an employer wishes to limit its employees from future competition, this matter should be directly between the employer and the employee, not between competing businesses.
The Court’s decision is now being appealed to the Pennsylvania Supreme Court. Unless reversed, it would mean the end of using a “no-hire” provisions to block a customer from stealing an employee.
This sweeping determination that all “no-hire” provisions violate public policy seems like a step too far. There are many industries where skilled employees could be induced to jump ship and work in-house for a customer. Without this type of restriction, your company could end up as little more than a temp agency allowing companies to test out your staff before hiring them directly. I would have rather seen the Court impose restrictions similar to all non-compete agreements, such a reasonable connection to a business’s interests and a limit as to scope and time.
Does your company use “no-hire” provisions in your contracts? If so, talk with your lawyer immediately about the Pittsburgh Logistics decision and how you can protect your company from its impact. It may also be time for another look at your non-compete agreements…