The Pennsylvania Supreme Court recently held in Socko v. Mid-Atlantic Systems of CPA, Inc. that a non-compete is enforceable only if a current employee receives new consideration beyond continued employment. The Court held that this is the case even if a non-compete provides that the parties “intend to be legally bound,” which typically obviates the need for consideration under the Pennsylvania Uniform Written Obligations Act (UWOA). After considering the historical background regarding non-competes and general principles of statutory construction, the Court concluded that “a construction of the UWOA which would vitiate the need for new and valuable consideration when entering into an agreement containing a restrictive covenant after the initiation of employment would be unreasonable.”
The Boston Bar Association recently held its 7th Annual Symposium on Employee Noncompete and Trade Secrets. In addition to practicing attorneys and an MIT-Sloan professor, the panel included three Massachusetts state legislators – Senators Jason Lewis and William Brownsberger, and Representative Lori Ehrlich – who have each authored pending legislation that would, to varying extents, render non-compete agreements unenforceable in the Commonwealth.
Although last year’s legislative efforts to ban—or limit further—non-competes in Massachusetts failed, proponents have vowed to revive the issue again in 2015-2016. Excluded from those proposed measures, however, has always been any restriction on employers’ use of customer non-solicitation clauses. Should the Legislature ever pass restrictions on non-competes, employers that have not already done so will flock in droves to the use of customer non-solicits, particularly with respect to sales-related employees. This makes the courts’ ongoing struggle to define customer “solicitation” in the digital age of paramount importance.
In the rapidly changing business world, protecting a company's human capital and proprietary information is critical to maintaining a competitive edge. On this blog, Nutter's experienced Business Litigation and Labor, Employment & Benefits attorneys offer news and insights on all aspects of restrictive covenants and trade secrets—from analyzing a rapidly evolving body of case law, to summarizing new legislation and legislative efforts, to providing other need-to-know updates and more.