Source: http://www.elinfonet.com/starticles/39/3
Timestamp: 2019-04-21 16:30:59+00:00

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The Pennsylvania Supreme Court has ruled that a non-compete signed during the course of employment, without additional consideration, is not enforceable even though the agreement stated that the parties “intend to be legally bound.” Socko v. Mid-Atlantic Systems of CPA, Inc.
n employee is not bound by a noncompete agreement signed during the course of his employment if he was not offered additional consideration, even though the agreement expressly stated the parties “intend to be legally bound,” the Pennsylvania Supreme Court has held in a 4-1 decision. Socko v. Mid-Atlantic Systems of CPA, Inc., No. 142 MAP 2014 (Nov. 18, 2015).
In Socko v. Mid-Atlantic Systems of CPA, Inc. (No. J-40-2015), the Pennsylvania Supreme Court ruled on an issue of first impression: whether the state’s Uniform Written Obligations Act (“UWOA”) allows employers to enforce a noncompete given to an employee while already employed without providing consideration. On November 18, 2015, the high court affirmed a Pennsylvania Superior Court’s May 2014 decision, ruling that without valuable consideration, noncompetes are unenforceable.
In a much anticipated decision released on November 18, 2015, the Supreme Court of Pennsylvania closed the door—if it was ever open—on any arguments doing away with the separate consideration required for restrictive covenant agreements entered into after the commencement of employment. In Socko v. Mid-Atlantic Systems of CPA, Inc., the Commonwealth’s supreme court reaffirmed the claim that Pennsylvania’s decades-old Uniform Written Obligations Act (UWOA) does not change the long-standing common law rule that covenants not to compete entered into after the commencement of employment must be accompanied by new and valuable consideration.
On November 18, 2015, in a highly anticipated decision, the Pennsylvania Supreme Court held that employers could not use the language set forth in Pennsylvania’s Uniform Written Obligations Act (“UWOA”) to avoid providing adequate consideration for a restrictive covenant signed by an employee. In Socko v. Mid-Atlantic Systems of CPA, Inc., the Court considered whether a non-compete agreement signed by Socko with Mid-Atlantic following the commencement of Socko’s employment was enforceable despite Mid-Atlantic’s failure to provide any benefit or change in employment status at the time of execution, by virtue of the parties’ statement in the agreement that they “intend to be legally bound” by its terms.
A recent ruling entered in Pennsylvania state court is a stark reminder to employers and employees about the dangers associated with violating post-employment restrictive covenants such as non-compete and non-solicitation provisions. The case, captioned as B.G. Balmer & Co. Inc. v. Frank Crystal & Co., centered around the question of whether a group of insurance brokers violated the non-solicitation clause in their employment agreements with Balmer. The group of departing employees first began to consider switching insurance brokers from Balmer to Crystal when they individually met with a recruiter in May 2003. Only a few months later, in July 2003, the group of employees all resigned from Balmer on the same day in order to start working for Crystal. Subsequent to their collective departure, approximately twenty clients switched insurance brokers from Balmer to Crystal.
A Philadelphia County state court judge recently issued a preliminary injunction in favor of a law firm against a former associate enforcing a 60-day notice provision.
Many people believe that an employer cannot enforce a non-compete agreement against an employee whom it has fired without cause. For years, many have cited two Pennsylvania Superior Court decisions to support this contention. But the Pennsylvania Superior Court just weighed in with a new opinion stating that courts must consider factors extending beyond whether and why the employee was fired. In short, Pennsylvania courts can no longer reflexively find non-competes unenforceable simply because an employee was terminated.
Third Circuit sets forth the criteria to support the imposition of an injunction related to a non-compete agreement.

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