Restrictive Covenants: Non-Solicitation Clause is Found Unenforceable Against Terminated Employee

In a recent New York federal court case interpreting Pennsylvania law, the court refused to enforce a non-solicitation clause against an employee who was terminated. In Fenner Precision Inc. v. Mearthane Products Corp. 2013 U.S. Dist. LEXIS 15588 (W. D. N. Y. February 5, 2013), the former employee defendant was a salesman in the field of elastomeric precision products for more than 20 years. His original employer was acquired by a new company and he was required to sign a non-compete agreement with a Pennsylvania choice-of-law provision, containing various restrictive covenants, including confidentiality, non-compete, and non-solicitation provisions. The employee was employed by the new employer for 4 years and then was terminated at age 58 without any reason being provided. Thereafter, the employee accepted employment with a competitor of his former employer. The former employer filed a Motion for Preliminary Injunction, not attempting to enforce the non-compete covenant, but instead only seeking to enforce the confidentiality and non-solicitation provisions.

In Fenner Precision, the Court reviewed Pennsylvania restrictive covenant law which requires that covenants be reasonable and places the burden of proving that they are not reasonable on the party opposing the covenant but noted that post-employment restrictive covenants are subject to a more stringent test of reasonableness than covenants ancillary to the sale of a business. See, John G. Bryant Co., Inc. v. Sling Testing & Repair, Inc., 471 Pa. 1, 12, 369 A.2d 1164, 1169 (Pa. 1977)

While the Court noted that Pennsylvania law has not expressly resolved whether pure non-solicitation clauses, which do not otherwise prohibit former employees from engaging in a particular occupation or field, should be subject to the test of reasonableness, the court relied upon a Pennsylvania Superior Court decision in Missett v. Hub Intern. Pennsylvania, LLC, 6 A.3d 530, 538-540 (Pa.Super. 2010), finding that a non-solicitation clause must be reasonable to be enforced. In Fenner Precision, the Court relied upon Pennsylvania cases clearly expressing a heightened scrutiny for employees who are terminated by their employers, on the theory that the employer views such employees as “worthless” and concluded that the Defendant employee is likely to prevail in demonstrating that enforcement of the non-solicitation clause against him would not be reasonable and denied the Motion for a Preliminary Injunction.

As we have commented before, there is a clear trend in Pennsylvania law not to enforce restrictive covenants. While they is an extremely positive development for all employees, the benefit of the trend is largely skewed only to high wage earners, due to the high initial costs associated with successfully litigating preliminary injunctions and restrictive covenants.

For more information on non-compete agreements, restrictive covenants, non-solicitation clauses and Abramson Employment Law see http://www.job-discrimination.com/lawyer-attorney-1134689.html

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Filed under Employment Law, Non-Compete Agreements

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