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No-poach employment provisions – are they still acceptable?

On March 20, 2019 by Schnader

UPDATE: PA Justices to Consider No-Hire Agreements between Businesses

The Pennsylvania Supreme Court will now address the question, “Are contractual no-hire provisions which are part of a services contract between sophisticated business entities enforceable under the law of this Commonwealth?”

In March, Schnader wrote about the trend among federal agencies, state governments, and court decisions to question whether no-poach employment provisions are still acceptable. On July 24, 2019, the Pennsylvania Supreme Court announced that it will hear the appeal in Pittsburgh Logistics Systems Inc. v. BeeMac Trucking LLC. The Court is expected to either confirm the demise of employee non-solicitation clauses in commercial transactions or breathe life back into such provisions. Guidance from the Court about the scope of valid practices for using these clauses would be helpful for businesses and other employers subject to Pennsylvania law.

Stay tuned! Click here to read Schnader’s earlier article, “No-poach employment provisions – are they still acceptable?” published in The PIOGA Press in March 2019. The article includes practical takeaways for what employers can do, even while this appeal is being heard, to protect their employee talent.

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ORIGINAL POST ON MARCH 20, 2019

Megan E. Harmon published “No-poach employment provisions – are they still acceptable?” in The PIOGA Press (March 2019), the newsletter of the Pennsylvania Independent Oil & Gas Association. Harmon is a partner in Schnader’s Business Services Department, a member of the Firm’s Executive Committee, and co-chair of the Energy & Environmental Practice Group and the Mergers and Acquisitions Practice Group.

She wrote:

“For years, the oil and gas industry, along with other sectors of the economy, has experienced a chronic shortage of qualified labor. In this era of low unemployment and lack of skilled workers with adequate training, employers are understandably protective of their workforce investments.

So when it’s time to add new talent, you will advertise for positions, maybe pay a recruiter, invest in employee training and have ramp-up time before new hires are fully functional―all at significant effort and cost. In order to protect your investment in these employees, you may ask customers to agree to contract provisions prohibiting them from hiring your workers without your consent.

These types of restrictions have become commonplace and are a safe and standard practice, right? Well … maybe not anymore. A recent Pennsylvania court decision, which follows a series of federal litigation and policy actions, should cause employers to consider no-poach employment provisions in a new light. Such matters can be tricky and involve employment and/or antitrust issues, so business leaders should work closely with legal counsel.”

Click here for a PDF of the full article Click here to read the full newsletter.