Thursday, October 14, 2010

Non-Solicitation Agreements: Factors to Consider - COTW #11

I've only written about one case all week, what did you think would be the Case of the Week!? It's Missett v. Hub Int'l Pennsylvania, LLC, 2010 PA Super 178, 2010 WL 3704984 (Pa. Super. Ct. Sept. 23, 2010). You may say it's a cop out, but I have four depositions today so cop that (how's that for customer appreciation?)! In all seriousness, I've left an extremely important aspect of Missett for today's post: The factors to consider when determining the enforceability of a restrictive covenant, here a nonsolicitation agreement.

First, a brief recap:
So, if the above two considerations were insufficient to render the covenant unenforceable, what else should the trial court have considered? First, the legal standard:
In Pennsylvania, restrictive covenants are enforceable if:
(1) they are incident to an employment relationship between the parties;
(2) the restrictions imposed by the covenant are reasonably necessary for the protection of the employer; and
(3) the restrictions imposed are reasonably limited in duration and geographic extent.
Citing All-Pak, Inc. v. Johnston, 694 A.2d 347, 350 (Pa.Super.1997).

The Court provided a helpful rundown of some practical considerations in assessing the reasonableness of the covenant:
  • "[P]ossible adverse effects on [the Employer] that could result from [the Employee's] use of [confidential and proprietary] information on behalf of a competitor;"
  • The reasonableness of the two-year duration of the non-solicitation period;
  • The Employee repeatedly signing similar agreements with the Employer; and consideration provided by the Employer;
  • "[P]ossible negative effects the restrictive covenant may have on [the Employee's] ability to earn a living and support his family;"
  • "Is the pool of potential customers so small that [the Employee] would have difficulty developing a book of business on his own?"
  • "Are these types of restrictive post-employment agreements standard and customary in the insurance industry?"
That's a pretty nice list the Court put together for us! But even with this extensive rundown, the Court still instructed the trial court to consider the factors above, "as well as any others that may be relevant to a determination as to whether the non-solicitation clause is reasonable and enforceable."

Sadly, Lawffice Space Non-solicitation Week is over now, but I'll be back next week with some posts on ADAAA developments and more.

Posted by Philip Miles, an employment lawyer with McQuaide Blasko in State College, Pennsylvania.