Tag Archives: Non-Compete Agreements

Restrictive Covenants / Non-Compete Agreements: Court Declines to Enter Preliminary Injunction – No Irreparable Harm Demonstrated

In De Lage Landen v. Thomasian, 2013 U.S. Dist. LEXIS 62639 (E. D. Pa. May 1, 2013) (Buckwalter, S. J.), the Defendant employee entered into an Employee Agreement with Restrictive Covenants and voluntarily terminated his employment with his former employer, one month after he had accepted an offer to work for a new employer, CoActiv. The employee admittedly breached his Employee Agreement by giving his former employer’s laptop and security credentials to his new employer which he subsequently returned. The Court declined to enter a preliminary injunction, finding that the plaintiff failed to prove irreparable harm (the difficulty in showing that damages can only be adequately compensated by granting an injunction”).

While the court found that the defendant breached a non-solicitation agreement by encouraging one of his former employer’s employees to work for CoActiv, the new employer; Coactive does not compete with the former employer on a national basis and the two companies “are not presently in the same ballpark.” In addition, the Defendant employee’s office was 40 miles from any of his former employer’s regional offices and the employee has not solicited former customers.

Even though the court found that the employee violated the Agreement and acceded to the terms of the Agreement including a provision for injunctive relief, the court declined to enter an injunction because there was no irreparable harm which “compensation in money alone cannot atone.” Ultimately, the court reasoned that “(th)e problem with plaintiff’s case is that it has offered nothing concrete to show what effect defendant’s leaving has had to date.”

For more information on Restrictive Covenants, Non-Compete Agreements and Abramson Employment Law, see http://www.job-discrimination.com/lawyer-attorney-2117941.html

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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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Non-Compete Agreement – Plaintiff Wins Declaratory Injunction Voiding Non-Compete Agreement for Lack of Consideration

Employees confronted with non-compete agreements often face an impossible situation. Even though there is an emerging trend in Pennsylvania courts where non-compete agreements are being voided, the cost of litigation often precludes employees from taking affirmative action. A recent Allegheny County case, Bosses v. Servicelink, C. C. P. Allegheny City, G.D. No. 12-012206 (Ward J.), shows that where a Plaintiff has sufficient resources to take affirmative action, a plaintiff’s declaratory judgment may be granted based upon established law.

In Bosses, the plaintiff began working for one company in a clerical position and rose to a Vice President position by the time the company was acquired by another company. At the time of the acquisition, the Plaintiff received a number of documents but did not sign the noncompete agreement until one month later when he was told he would lose his job if he did not sign. Several years later the Plaintiff received a job offer from another company, contingent upon becoming unencumbered by the non-compete.

The Court relied upon many principals Plaintiffs can rely upon to invalidate restrictive covenants: the loss of a business opportunity may be characterized as an irreparable injury, Santoro v. Morse, 781 A.2d 1220, 1227-28 (Pa.Super. 2001); an employee has an important interest in being able to earn a living in his chosen profession.” All-Pak, Inc. v. Johnston, 694 A.2d 347, 351 (Pa.Super. 1997); and restrictive covenants are not favored in Pennsylvania, as they can be seen as a trade restraint preventing a former employee from earning a living. Hess v. Gebhard & Co, 808 A.2d 912, 920 (Pa. 2002). Ultimately, in Bosses, the court cited established law concluding that “a restrictive covenant will not be enforced if no consideration was exchanged for its execution.” Shepherd v. Pittsburgh Glass Works, LLC, 25 A.3d 1233, 1243 (Pa.Super. 2011.

Bosses shows that when an employee has the resources to take affirmative action, established appellate law in Pennsylvania can lead to positive results. Unfortunately, when an employee is not an executive, the end result can be much different, solely as a consequence of not having the resources to take on a well financed corporation. This is a key difference between non-compete litigation and a typical employment discrimination case, where the Plaintiff is solely seeking money damages. Fortunately, Plaintiffs in employment discrimination cases often have the support of attorneys willing to enter into contingency fee agreements which can make the playing field more equal.

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

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