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My colleagues and I have written much recently regarding governmental antitrust authorities’ review of no-poach conduct (for example, see here). But let us not forget the additional scrutiny such agreements can face in commercial litigation. A recent Pennsylvania Supreme Court case considered, for the first time in that state, whether such provisions are enforceable under Pennsylvania law when they are ancillary to a services contract between two businesses.
See Pittsburgh Logistics Sys., Inc.
v. Beemac Trucking, LLC., No. 31 WAP 2019, 2021 WL 1676399 (Pa. Apr. 29, 2021).
The case was brought by Pittsburgh Logistics Systems, Inc. (“PLS”), described as a logistics provider that arranged for the shipping of its customers’ freight with selected companies, against Beemac Trucking, LLC (“Beemac”), one of those selected companies. The Services Contract between the two companies apparently contained a one-year, no
Recently, in
Pittsburgh Logistics Systems, Inc. v. Beemac Trucking
, LLC, No. 31 WAP 2019, A.3d –, 2021 WL 1676399 (Apr. 29, 2021), the Pennsylvania Supreme Court found that a no-hire provision that was ancillary to a services contract between two businesses was an unreasonable restraint on trade and was therefore not enforceable. In ruling on this matter of first impression, the Court identified several important factors that employers should consider before entering into a no-hire provision that places restrictions on the movement of their employees.
Background on Case:
Pittsburgh Logistics Systems, Inc. (“PLS”) is a third-party logistics provider that arranges for the shipping of its customers’ freight with selected trucking companies. PLS contracted with Beemac Trucking (“Beemac”) to provide such shipping services, and the two entered into an agreement that contained the following non-solicitation and no-hire provisions:
The Supreme Court of Pennsylvania recently affirmed a Superior Court order in
Pittsburgh Logistics Systems, Inc. v. Beemac Trucking, LLC et al., No. 31 WAP 2019, finding a no-hire provision between competing, sophisticated businesses to be void as a matter of public policy and not enforceable. See previous Troutman Pepper article on the Superior Court s decision and its potential ramifications here. While the Supreme Court reviewed out-of-state and federal case law discussed by the parties on the enforceability of no-poach provisions and noted the federal government s recent efforts to curb no-poach use, it focused its analysis and ruling on the balancing test set forth in the Restatement (Second) of Contracts. Under that test, the Court reasoned that while there was a legitimate interest for the no-hire provision in the first instance, on balance here, the restraint was both overly broad and harmful to the public. Therefore, although the outcome represents a victory for Beemac aft
Mundy | PA Courts
HARRISBURG – In what was believed to be an issue of first impression, the Supreme Court of Pennsylvania recently issued a unanimous ruling which declared an expansive no-hire provision between two companies null and void under state law – while at the same time not ruling on the legality of such provisions in general.
On April 29, the state Supreme Court released its
ruling in the case of
Pittsburgh Logistics Systems, Inc. v. Beemac Trucking, LLC Et.Al, which held that a contractual no-hire provision in a services contract specifically between these two companies was not enforceable under Pennsylvania law.
Supreme Court of Pennsylvania held unenforceable a no-hire provision in a service contract between a logistics company and a trucking firm: Pittsburgh Logistics Systems, Inc. v. Beemac Trucking LLC: overly broad and undermined fair competition for employees in shipping and logistics industry.