Court Opinion

ID: 3155889
Source: CourtListenerOpinion
Date Created: 2015-11-18 21:08:10.095934+00
Date Added: 2024-06-11T12:03:12.123260
License: Public Domain

[J-40-2015]
                      IN THE SUPREME COURT OF PENNSYLVANIA
                                  MIDDLE DISTRICT

                     SAYLOR, C.J., EAKIN, BAER, TODD, STEVENS, JJ.

DAVID M. SOCKO,                               :   No. 142 MAP 2014
                                              :
                        Appellee              :   Appeal from the Order of the Superior
                                              :   Court dated May 13, 2014 at No. 1223
                                              :   MDA 2013, affirming the Order of the
                v.                            :   Court of Common Pleas of York County,
                                              :   Civil Division, dated October 15, 2012 at
                                              :   No. 2012-SU-001608-44
MID-ATLANTIC SYSTEMS OF CPA,                  :
INC.,                                         :   ARGUED: May 6, 2015
                                              :
                        Appellant             :

                                          OPINION

MADAME JUSTICE TODD                                        DECIDED: November 18, 2015
         In this appeal by allowance, we consider an issue of first impression: whether

the enforcement of an employment agreement containing a restrictive covenant not to

compete, entered into after the commencement of employment, may be challenged by

an employee for a lack of consideration, where the agreement, by its express terms,

states that the parties “intend to be legally bound,” which language implicates the

insulating effect of the Uniform Written Obligations Act (“UWOA”).1           In light of our

Commonwealth’s long history of disfavoring restrictive covenants, and the mandate that

covenants not to compete entered into after the commencement of employment must

be accompanied by new and valuable consideration — a benefit or change in

1
    Act of May 13, 1927, P.L. 985, No. 475, § 1 (33 P.S. § 6).
employment status — we conclude an employee is not precluded from challenging such

an agreement executed pursuant to the UWOA.              Thus, we affirm the order of the

Superior Court.

         The facts underlying this appeal are not in dispute.        Appellant Mid-Atlantic

Systems of CPA, Inc. (“Mid-Atlantic”) is in the business of providing basement

waterproofing services. Mid-Atlantic hired Appellee David Socko (“Socko”) in March

2007 as a salesperson. At this time, Socko executed a two-year employment contract

containing a covenant not to compete. In February 2009, Socko resigned from his

employment with Mid-Atlantic, but the company rehired him four months later, in June

2009. At his time of rehire, Socko signed a new employment agreement containing

another two-year covenant not to compete.

         While still employed by Mid-Atlantic, on December 28, 2010, Socko signed a

third,   more   restrictive,   agreement,   entitled   “the   Non-Competition   Agreement”

(“Agreement”), which, by its terms, superseded all prior agreements. Pursuant to the

Agreement, which is at the heart of his appeal, Socko was not permitted to compete

with Mid-Atlantic for two years after the termination of his employment in any of the

following locations: Connecticut, the District of Columbia, Delaware, Maryland, New

Jersey, Pennsylvania, New York, Virginia, West Virginia, or any other jurisdiction in

which Mid-Atlantic did business.       The Agreement also expressly provided for the

application of Pennsylvania law, and stated that the parties intended to be “legally

bound.”

         On January 16, 2012, Socko resigned from his employment with Mid-Atlantic

and, a few weeks later, accepted a position with Pennsylvania Basement

Waterproofing, located in Camp Hill, Pennsylvania, which was a competitor of Mid-

Atlantic. Approximately one month later, Mid-Atlantic informed Socko’s new employer

                                       [J-40-2015] - 2
of the terms of Socko’s prior employment with Mid-Atlantic, attached a copy of the

Agreement, and threatened litigation.        Ten days later, Pennsylvania Basement

Waterproofing terminated Socko’s employment.

      As a result of his termination, on April 13, 2012, Socko filed a Complaint and

Action for Declaratory Judgment against Mid-Atlantic in the York County Court of

Common Pleas. In support thereof, Socko filed a motion for partial summary judgment,

asserting that the non-competition clause in the Agreement was unenforceable, as it

was not supported by sufficient consideration. It was not disputed by the parties that

the Agreement was signed during the course of Socko’s employment, and that Socko

did not receive any benefit or any change in his existing employment status in exchange

for signing the Agreement.     Mid-Atlantic, however, citing the parties’ pledge in the

Agreement to be “legally bound,” contended that the UWOA did not allow Socko to

challenge the validity of the terms of the Agreement on the basis of a lack of

consideration.2

      The trial court granted Socko’s motion for partial summary judgment, offering in a

well-written opinion, that there was a want of consideration in exchange for Socko’s

execution of the Agreement after he had commenced his employment. Further, the

court reasoned that the mere intent by Socko, as expressed in the Agreement, to be

“legally bound,” did not constitute adequate consideration under the UWOA.3

2
  Pursuant to the dictates of the UWOA, a written promise “shall not be invalid or
unenforceable for lack of consideration, if the writing also contains an additional express
statement, in any form of language, that the signer intends to be legally bound.” 33 P.S.
§ 6.
3
  Socko also asserted claims against Mid-Atlantic pursuant to the Pennsylvania Wage
Payment and Collection Law, 43 P.S. § 260.3. These claims were settled and
discontinued on June 12, 2013.

                                     [J-40-2015] - 3
      On appeal, a unanimous panel of the Superior Court, in a thorough and scholarly

published opinion authored by Judge Christine Donohue, affirmed the trial court’s

granting of Socko’s motion for partial summary judgment.           Socko v. Mid-Atlantic

Systems of CPA, Inc., 99 A.3d 928 (Pa. Super. 2014). After tracing the history of the

treatment, and disfavor of, restrictive covenants in Pennsylvania, the court explained

that, when an employee enters into an employment contract subsequent to the

commencement of employment, which contains a covenant not to compete, the

covenant must be supported by new consideration in the form of a benefit to the

employee or a beneficial change to his or her employment status.

      The court went on to consider the effect of the UWOA in light of the substantial

common law public policy disfavoring restrictive covenants. The court acknowledged

that the statute provided that a written promise shall not be invalid or unenforceable for

lack of consideration if the writing also contains an express statement that the signer

“intends to be legally bound,” 33 P.S. § 6, and that Pennsylvania courts have interpreted

this section to mean that, in certain circumstances, a written agreement containing the

express statement to be legally bound is not void for lack of consideration.

Nevertheless, the Superior Court observed that, while, typically, and under the UWOA,

courts will not inquire as to the adequacy of consideration, the area of restrictive

covenants in employment contracts is an exception to this general rule. Importantly, the

court pointed out that, while our Court has held that a contract under seal imports

consideration which a party is not permitted to deny, such a seal is deemed inadequate

consideration to support a covenant in restraint of trade; furthermore, the Superior Court

reasoned that the seal and the UWOA had the same legal effect — to import

consideration into a contract and eliminate the need for evidence of consideration.

                                     [J-40-2015] - 4
      Thus, the court concluded that for a covenant not to compete to be enforceable,

an employee must receive actual and valuable consideration for signing an employment

agreement containing such a restrictive covenant, and that contract language “agreeing

to be legally bound,” which satisfies the UWOA, nevertheless fails to provide the

employee an actual benefit, and, therefore, is inadequate to support the enforcement of

such a covenant. As Mid-Atlantic did not provide actual and valuable consideration to

Socko when he executed the Agreement, the Superior Court concluded that the trial

court properly found the Agreement to be unenforceable.

      Mid-Atlantic filed a petition for allowance of appeal, which we granted to address

the following question:   whether an employment agreement containing a restrictive

covenant not to compete, entered into after the commencement of employment, is

unenforceable for lack of consideration where the employer provided the employee with

no benefit or change in employment status at the time of execution, but where the

agreement expressly states that the parties “intend to be legally bound” by its terms.

See Socko v. Mid-Atlantic Systems of CPA, Inc., 105 A.3d 659 (Pa. 2014) (order).4 As

4
 We granted allocatur on three issues, as raised by Mid-Atlantic, but these issues more
accurately represent sub-arguments pertaining to the singular issue before the Court.
The issues on which we granted appeal are:

             1) Did the Superior Court misconstrue the [UWOA]
             considering the UWOA is not a "substitute for consideration,"
             nor is it intended to "rectify a lack of consideration" as the
             Superior Court asserts, but instead, is a statute that merely
             prevents a party to a written agreement in which the party
             expresses an intention to be legally bound from later
             challenging that validity of the contract based upon lack of
             consideration?

            (2) Did the Superior Court erroneously rely upon allegedly
            analogous "seal" cases to support its determination that the
            UWOA does not provide consideration for a non-competition
(continuedL)

                                    [J-40-2015] - 5
the issue before us concerns the construction of the UWOA, and, thus, raises a pure

question of law, our standard of review is de novo, and our scope of review is plenary.

DEP v. Cumberland Coal Resources, LP, 102 A.3d 962, 970 (Pa. 2014); Buffalo Twp. v.

Jones, 813 A.2d 659, 664 n.4 (Pa. 2002).

       Mid-Atlantic’s primary argument is that the Superior Court improperly determined

that the UWOA serves as “consideration, or a substitute for consideration” and that the

statute intended to “rectify a lack of consideration.” Appellant’s Brief at 15. Mid-Atlantic

submits that the UWOA is not a substitute for consideration, but, rather, prohibits a party

to a written agreement in which the party expresses an intention to be “legally bound”

from later challenging the contract based on a lack of consideration.5         Mid-Atlantic

agrees with Socko that additional valuable consideration must be provided to an

employee that signs a non-compete subsequent to the commencement of the

employment relationship, but takes the position that, even if there is not additional

valuable consideration, as the case here, nevertheless, under the UWOA, the “legally

bound” language acts as a bar to a challenge to the validity of the agreement based

upon a lack of consideration, citing McGuire v. Schneider, Inc., 534 A.2d 115, 118 (Pa.

(Lcontinued)
            restrictive covenant entered into subsequent to the
            commencement of the employment relation, considering a
            seal on a document has long been held to [import]
            consideration, whereas, to the contrary, the UWOA does not
            [import] consideration, and the authority relied upon by the
            Superior Court did not support this conclusion[?]

              (3) Did the Superior Court impermissibly amend the UWOA
              under the guise of interpreting it?

5
  While it is questionable whether this estoppel line of advocacy was fully raised before
the tribunals below, we will nevertheless address Mid-Atlantic’s arguments in this
regard.

                                      [J-40-2015] - 6
Super. 1987) (“Under the [UWOA], that statement of intent removes lack of

consideration as a ground for avoiding the contract.”), as well as certain federal and trial

court decisions in support of its position.

       Mid-Atlantic goes on to list numerous rights which a party may contract away for

a benefit, such as the right to a jury trial, forum selection, right to seek relief in court,

and choice of law. Here, according to Mid-Atlantic, the agreement to be legally bound

contracts away the right to later challenge the contract on the basis of a lack of

consideration. For this reason, Mid-Atlantic further asserts that the Superior Court’s

reliance on contract-under-seal cases is misplaced, as in Mid-Atlantic’s view, the seal

(supplying consideration to support a covenant) and the UWOA (prohibiting a later

challenge for lack of consideration), as described above, do not have the same effect.

Mid-Atlantic rejects as dicta language in the cases relied upon by the Superior Court for

the proposition that a seal and the UWOA share the same legal effect — namely, to

import consideration into a contract and eliminate the need for proof of the existence of

consideration. See Morgan’s Home Equip. Corp. v. Martucci, 136 A.2d 838 (Pa. 1957);

Fedun v. Mike’s Café, Inc., 204 A.2d 776 (Pa. Super. 1964).

       Related thereto, Mid-Atlantic argues that, while the import of the seal under the

common law may be altered by courts, the UWOA may not be rewritten by the Superior

Court under the guise of interpretation. Employing tools of statutory construction, Mid-

Atlantic maintains that the plain and unambiguous language of the UWOA controls over

any offering by Socko of the history of the Model Act, as discussed more fully below.

Mid-Atlantic stresses that the Superior Court may not legislate, and, here, the clear

language of the UWOA covers all agreements, including the Agreement at issue herein,

which contain the operative language of the UWOA. Mid-Atlantic also urges our Court

to decline Socko’s request to find an exception to the UWOA for non-compete

                                       [J-40-2015] - 7
agreements where none exists, and to hold that a non-competition restrictive covenant

entered into after the commencement of employment may not be deemed to be void for

lack of consideration pursuant to the UWOA when the employee agrees to be legally

bound by its terms.

       Socko counters that Mid-Atlantic’s interpretation of the UWOA is inconsistent with

the well-established principle that a restrictive covenant entered into after the

commencement of the employment relationship is not enforceable — that is, is void as

against public policy — if it lacks valuable consideration. Socko provides that restrictive

covenants historically have been disfavored by the courts, as they are viewed as a

restraint of trade preventing a former employee from earning a living. Socko asserts

that, on one hand, Mid-Atlantic accepts that the UWOA is not a substitute for

consideration, and does not disturb the requirement that valuable consideration is

needed to support a restrictive covenant; but, on the other hand, Mid-Atlantic avers the

UWOA nevertheless precludes a party to a non-compete agreement from challenging

the covenant if valuable consideration is not provided.        Socko warns that, as the

boilerplate language that the parties “intend to be legally bound” appears in almost

every contract in Pennsylvania, the practical effect of Mid-Atlantic’s interpretation of the

UWOA would be the elimination of the consideration requirement for restrictive

covenants.   Contrary to Mid-Atlantic’s position, Socko develops that our Court has

stated that the UWOA’s language as applied to a typical contract is a substitute for

consideration.   See Morgan’s.     Socko further rejects Mid-Atlantic’s reliance on the

Superior Court’s decision in McGuire for the proposition that the UWOA acts as a bar to

a challenge based on lack of consideration, as, according to Socko, that decision did

not involve a restrictive covenant, the reference to the UWOA was dicta, and

subsequent Superior Court decisions involving restrictive covenants have made clear

                                      [J-40-2015] - 8
that the UWOA is not a remedy for a lack of consideration for a restrictive covenant in

an employment agreement.

       Further, Socko maintains that the Superior Court’s citation to contract-under-seal

cases was appropriate, as the language which satisfies the UWOA serves as a

substitute for consideration in the same manner that a seal serves as a substitute for

consideration. Socko offers that a “contract under seal imports consideration that a

party is not permitted to deny,” Appellee’s Brief at 9 (quoting Gompers v. Rochester, 56

Pa. 194, 197 (1868)), but highlights that the only exception to the rule is when the

contract involves a restraint of trade, citing Selden v. Jackson, 230 A.2d 197, 197-98

(Pa. 1967). Socko further argues that reliance upon seal decisions was proper, noting

that in Morgan’s, our Court stated that the practical effect of a statement of intent to be

legally bound under the UWOA is the equivalent of signing the agreement under seal.

       Similarly, Socko responds to Mid-Atlantic’s claim that the Superior Court

effectively amended the UWOA, pointing out that the court carefully and correctly

applied 150 years of jurisprudence regarding agreements in restraint of trade to the

facts of this case. Indeed, Socko highlights Professor Samuel Williston’s understanding

of the UWOA when he drafted the Model Act in 1925, and envisioned it to act as a

moderate and reasonable substitute to the use of seals. Further, Socko emphasizes

that the Model Act was promulgated in 1925, Pennsylvania enacted the statute in 1927,

and while Utah, the only other state to do so, adopted the UWOA in 1929, it repealed

the statute four years later, leaving Pennsylvania as the only state to retain the uniform

rule. Socko emphasizes, however, that it was never suggested that the statute was

enacted to circumvent Pennsylvania law regarding agreements in restraint of trade,

which, according to Socko, was well-established at the time the UWOA was enacted.

                                     [J-40-2015] - 9
         Amicus Richard Matesic, a solo practitioner from Shaler Township, Allegheny

County, Pennsylvania, who represents individuals in employment and consumer

protection litigation, provides a history of the UWOA and disputes Mid-Atlantic’s

interpretation of the act as being against the public policy of the Commonwealth, which

prohibits the enforcement of a non-competition agreement without adequate

consideration and which discourages restraints of trade. Amicus contends that, while

there exists no legislative history regarding the passage of the UWOA, the various

commissioners of the National Conference of Commissioners on Uniform State Laws,

including Professor Williston, “advanced a libertarian view, one that frankly ignored the

social costs attendant in enforcement of adhesive contracts; they believed any person

should be free to bind themselves irrevocably to an obligation, simply by signing a

document containing the words that the promisor ‘intend[ed] to be legally bound.’”

Amicus Brief at 8. Yet, Amicus maintains that, at these discussions, Williston also was

of the view that the statute would not prevent a court sitting in equity from refusing to

enforce a signed agreement containing the “legally bound” verbiage.        According to

Amicus, application of the UWOA would lead to an absurd and unreasonable result, as

restraints on trade have been historically disfavored in the law, new and valuable

consideration must be conferred on a currently employed individual for a new promise

not to compete, and application of the UWOA, as interpreted by Mid-Atlantic, would

deprive a court from ever determining whether adequate compensation was paid.

         Our analysis begins with a review of our Commonwealth’s treatment of

employment agreements containing restrictive covenants at common law. Well before

Horace Wood’s 1877 treatise on master and servant,6 which widely accelerated the

universal adoption of the at-will employment doctrine by the various states,

6
    H. Wood, A Treatise on the Law of Master and Servant § 136 (2d ed. 1886).

                                     [J-40-2015] - 10
Pennsylvania embraced the notion that, in employment contracts of indefinite duration,

either party could sever that relationship at will — that is, for any reason or no reason.

Kirk v. Hartman & Co., 63 Pa. 97, 105 (1870) (“When . . . a person is employed as an

agent, traveller [sic] or salesman, for no definite time, the law does not imply a hiring by

the year, but at the will of both parties, and the principal has a right to terminate it at any

time, and to discharge the agent from his service without notice.”); Peacock v.

Cummings, 46 Pa. 434, 437 (1864) (“Duration of service was left to be defined by

agreement, outside of the articles, or, if not defined, it was necessarily at will.”). While

of considerable vintage, the at-will doctrine retains its vitality in Pennsylvania to this day.

Weaver v. Harpster, 975 A.2d 555 (Pa. 2009); Henry v. Pittsburgh & Lake Erie R.R. Co.,

21 A. 157 (Pa. 1891).

       The at-will employment doctrine, however, is subject to certain exceptions,

including, inter alia, statutory restrictions, judicially-created notions of public policy, and

contractual provisions, which may serve as a limitation on the otherwise broad power to

terminate the at-will employment relationship. One aspect of a contractual exception to

the at-will doctrine, directly at issue in this appeal, is a restrictive covenant not to

compete. In the absence of an agreement between an employer and employee to the

contrary, the law does not prohibit an employee from competing with his former

employer after the employee’s service has been terminated. Morgan’s, 136 A.2d at

844. Non-competition restrictive covenants typically prohibit competition by a former

employee for a specified time within a designated geographical area. Such covenants

may serve to safeguard an employer’s protectable business interests which may relate

to an employee’s special skills; the safeguarding of customer goodwill; proprietary

business information, including processes, trade secrets, and inventions; as well as the

time and resources the employer has invested in the training of its employees.

                                      [J-40-2015] - 11
      While a covenant not to compete may be desirable and justified in some

circumstances on the part of an employer, Pennsylvania courts have historically viewed

such covenants as contracts in restraint of trade that prevent a former employee from

earning a livelihood, and, therefore, have disfavored such provisions in the law. See,

e.g., Hess v. Gebhard & Co. Inc., 808 A.2d 912, 917 (Pa. 2002); Morgan’s, 136 A.2d at

844. As our Court has explained:

             It has long been the rule at common law, that contracts in
             restraint of trade made independently of a sale of a business
             or contract of employment are void as against public policy
             regardless of the valuableness of the consideration
             exchanged therein.
Morgan’s, 136 A.2d at 845.

      While generally disfavored, Pennsylvania law, however, has recognized the

validity and enforceability of covenants not to compete in an employment agreement,

assuming adherence to certain requirements. See Pulse Technologies, Inc. v. Notaro,

67 A.3d 778 (Pa. 2013); Morgan’s, 136 A.2d at 844; see generally Kurt H. Decker,

Refining Pennsylvania’s Standard for Invalidating a Non-Competition Restrictive

Covenant When an Employee’s Termination is Unrelated to the Employer’s Protectible

Business Interest, 104 Dick. L. Rev. 619 (2000). Our Court noted in Morgan’s the

evolution of the treatment of restrictive covenants. Such covenants were first found to

be absolutely void as against public policy due to a high societal demand for, but low

supply of, skilled workers. Later, due to the reality of the new era brought on by the

industrial revolution, a more balanced approach was taken by the courts which

accepted partial restraints on trade, provided they were ancillary to the employment

relationship and reasonably limited:

             Such general covenants not to compete present centuries
             old legal problems. The earliest cases were decided against

                                       [J-40-2015] - 12
             the economic background of a chronic shortage of skilled
             workers in England, the result of the virulent epidemics of
             the Black Death during the fourteenth century. It was not
             surprising, then, that all covenants to refrain from practicing
             a trade were held to be void as against public policy. This
             policy carried over into the early seventeenth century when
             the grants of exclusive trading privileges by the Sovereign
             caused widespread public indignation which broadened into
             a dislike for all restraints upon the free exercise of trade.
             However, by the eighteenth century England found itself in
             the midst of a new commonercial [sic] era, and adjusting to
             changed economic conditions, the courts upheld at common
             law contracts in partial restraint of trade provided they were
             ancillary to a principal transaction, and were reasonably
             limited both in geographical extent and duration of time.
Morgan’s, 136 A.2d at 844; see also Hess, 808 A.2d at 917-18.

      Consistent with this legal background, currently in Pennsylvania, restrictive

covenants are enforceable only if they are: (1) ancillary to an employment relationship

between an employee and an employer; (2) supported by adequate consideration; (3)

the restrictions are reasonably limited in duration and geographic extent; and (4) the

restrictions are designed to protect the legitimate interests of the employer. Hess, 808

A.2d at 917; Piercing Pagoda, Inc. v. Hoffner, 351 A.2d 207, 210 (Pa. 1976); Morgan’s,

136 A.2d at 844-46.

      As with other contracts, for an employment agreement containing a restrictive

covenant to be enforced, consideration is crucial, whether the covenant is entered into

prior to, during, or after employment ends. Thus, to be valid, a covenant not to compete

must be consummated with the exchange of consideration.           Capital Bakers Inc. v.

Townsend, 231 A.2d 292, 293-94 (Pa. 1967) (restrictive covenant in employment

contract executed 12 years after the start of employment was unenforceable for lack of

consideration).   If a noncompetition clause is executed at the inception of the

employment, the consideration to support the covenant may be the award of the

                                    [J-40-2015] - 13
position itself.   Barb-Lee Mobile Frame Co. v. Hoot, 206 A.2d 59, 61 (Pa. 1965);

Morgan’s, 136 A.2d at 845 (holding covenant not to compete may be enforceable if

contained in an employment agreement executed upon the “taking of employment”).

However, a restrictive covenant is not required to be included in the initial employment

contract to be valid. Jacobson & Co. v. Int’l. Environment Corp., 235 A.2d 612, 618 (Pa.

1967); see generally Jordan Liebman and Richard Nathan, The Enforceability of Post-

Employment Noncompetition Agreements Formed After At-Will Employment Has

Commenced: The “Afterthought” Agreement, 60 S. Cal. L. Rev. 1465 (1987). There

are legitimate reasons for this, including the development of a worker’s expertise, but

only after employment for a period of time:

               [I]n many instances, . . . the insertion of a restrictive
               covenant in the original contract would serve no valid
               purpose. An employer who hires a novice has no desire to
               restrict his present competitive force. Only when the novice
               has developed a certain expertise, which could possibly
               injure the employer if unleashed competitively, will the
               employer begin to think in terms of the protection of a
               restrictive covenant.
Jacobson & Co., 235 A.2d at 618.

         When a non-competition clause is required after an employee has commenced

his or her employment, it is enforceable only if the employee receives “new” and

valuable consideration — that is, some corresponding benefit or a favorable change in

employment status. See Pulse Technologies, Inc., 67 A.3d at 781-82. Sufficient new

and valuable consideration has been found by our courts to include, inter alia, a

promotion,7 a change from part-time to full-time employment,8 or even a change to a

7
    M.S. Jacobs and Assoc., Inc. v. Duffley, 303 A.2d 921, 923 (Pa. 1979).
8
    Modern Laundry & Dry Cleaning Co. v. Farrer, 536 A.2d 409, 411 (Pa. Super. 1988).

                                     [J-40-2015] - 14
compensation package of bonuses, insurance benefits, and severance benefits.9

Without new and valuable consideration, a restrictive covenant is unenforceable.

Maintenance Specialties Inc. v. Gottus, 314 A.2d 279, 281 (Pa. 1974).               More

specifically, the mere continuation of the employment relationship at the time of entering

into the restrictive covenant is insufficient to serve as consideration for the new

covenant, despite it being an at-will relationship terminable by either party.      Pulse

Technologies, Inc.; George W. Kistler, Inc. v. O’Brien, 347 A.2d 311, 316 (Pa. 1975)

(plurality).

         In sum, while at common law, covenants in restraint of trade have long been

disfavored by Pennsylvania courts, an agreement containing a non-compete clause will

be upheld, if, among other considerations, it is supported by adequate consideration. In

the context of requiring an employee to agree to a restrictive covenant mid-employment,

however, such a restraint on trade will be enforceable only if new and valuable

consideration, beyond mere continued employment, is provided and is sufficient to

support the restrictive clause.

         As the interplay between this common law treatment of restrictive covenants and

the effect of a statute — here, the UWOA — is at issue, we next turn to the guiding

principles set forth in the Statutory Construction Act.     1 Pa.C.S. §§ 1501 et seq.

Pursuant to that enactment, the objective of all interpretation and construction of

statutes is to ascertain and effectuate the intention of the General Assembly. Id. §

1921(a). “The best indication of the legislature’s intent is the plain language of the

statute.” Dorsey v. Redman, 96 A.3d 332, 340 (Pa. 2014). When considering statutory

language, “[w]ords and phrases shall be construed according to rules of grammar and

according to their common and approved usage.” 1 Pa.C.S. § 1903(a). Further, when

9
    Davis & Wade, Inc. v. Tripodi, 616 A.2d 1384, 1387 (Pa. Super. 1992).

                                     [J-40-2015] - 15
the words of a statute are clear and unambiguous, there is no need to go beyond the

plain meaning of the language of the statute “under the pretext of pursuing its spirit.” Id.

§ 1921(b). Thus, only when the words of a statute are ambiguous should a reviewing

court seek to ascertain the intent of the General Assembly through considerations of

other factors enumerated in Section 1921(c).       Id. § 1921(c); see generally Bayada

Nurses Inc. v. Com. Dept. Labor and Indus., 8 A.3d 866, 880-81 (Pa. 2010).

       Through certain additional canons of construction, the legislature has provided

further guidance. The General Assembly counsels that it does not intend a result that is

absurd, impossible of execution, or unreasonable. 1 Pa.C.S. § 1922. Moreover, the

rule that statutes in derogation of the common law are to be strictly construed —

ostensibly, so as to not drastically change the existing law — shall have no application

to the statutes of this Commonwealth enacted after September 1, 1937, id. § 1928(a);

thus, stated in the affirmative, and as applied to this matter, the UWOA, enacted in

1927, to the degree it is in derogation of the common law, must be strictly construed. 1

Pa.C.S. § 1928(b)(8).

       With the common law treatment of restrictive covenants in employment contracts,

as well as the guiding principles of statutory construction, in hand, we turn to consider

how an employee’s challenge to the enforcement of an employment agreement

containing a restrictive covenant not to compete, entered into after the commencement

of employment and without consideration, yet containing the language “intend[ing] to be

legally bound,” is impacted by the UWOA.

       Initially, we look to the language of the UWOA itself. We note that, by its terms,

the UWOA commands that a written promise “shall not be invalid or unenforceable for

lack of consideration, if the writing also contains an additional express statement, in any

form of language, that the signer intends to be legally bound.” 33 P.S. § 6.            Our

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caselaw has explained that, generally, this section provides that a written agreement will

not be deemed to be void for lack of consideration if it contains an express statement

that the signer intends to be legally bound, Yocca v. Pittsburgh Steelers Sports, Inc.,

854 A.2d 425, 433 (Pa. 2004), and, more explicitly, has interpreted this provision to

supply the necessary consideration for an agreement. See Morgan’s, 136 A.2d at n.12

(parties’ express intention to be legally bound within meaning of UWOA has the same

effect in importing consideration as a seal on the agreement). Mid-Atlantic, however,

rejects this interpretation and, as noted above, claims that the “legally bound” language

does not act as a substitute for consideration, but, rather, bars the signer from

challenging the agreement on the basis of a lack of consideration.

       In light of the clear and unambiguous language of the UWOA, and consistent

with our prior caselaw, we reject Mid-Atlantic’s view and conclude that a contract

containing a written express statement of intent to be “legally bound” supplies the

necessary consideration to support the enforceability of an agreement. The UWOA

does not speak of extinguishing a cause of action or barring a challenge, but, rather,

speaks in terms of merits or relief — if the promise is to be legally binding, the contract

“shall not be invalid or unenforceable for lack of consideration.” 33 P.S. § 6.

       Further, even if we were to find the language to be unclear in this regard, while

there is no legislative history from our General Assembly regarding the passage of the

UWOA, the history underlying the creation of the uniform law shows that the drafter of

the UWOA, the famed Professor Samuel Williston, specifically intended to revive the

function of the seal as it formerly existed but without the formality, ritual, and

shortcomings associated with seals.         Handbook of the National Conference of

Commissioners on Uniform State Laws and Proceedings of the Thirty-Fifth Annual

Meeting (Detroit, Michigan 1925) at 194-97; Amicus Brief at 9-10. This being the case,

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the UWOA was viewed as providing a substitute for the seal — thus providing

consideration — and, consistent with the language of the statute, the lack of actual

consideration would not result in an invalid or unenforceable agreement. Therefore, for

these reasons, we reject Mid-Atlantic’s interpretation of this statutory provision as

prohibiting a signatory to the agreement from challenging the contract on the basis of a

lack of consideration.

       Ultimately, however, whether the UWOA provides the necessary consideration,

akin to the seal, or whether the provision renders an agreement immune from

challenge, the practical effect is the same: any party challenging the validity of a

contract containing an express intent to be legally bound will not be entitled to relief

from the agreement on the basis that the promises made therein lack consideration.

Thus, based solely upon the language of the UWOA, it appears that, despite the lack of

consideration, the Agreement would be enforceable against Socko.

       This is not the end of our analysis, however, as we must take into account the

additional considerations found in the General Assembly’s cannons of statutory

construction. Specifically, we must determine if such an interpretation of the statute

leads to an absurd or unreasonable result. 1 Pa.C.S. § 1922. Moreover, in interpreting

the legislature’s intentions, we must, according to the dictates of the Statutory

Construction Act, strictly construe the UWOA, because it was enacted prior to

September 1, 1937, and because it is in derogation of the common law mandating that

restrictive covenants be supported by actual consideration. 1 Pa.C.S. § 1928(b)(8).

       We consider whether applying the plain language of the UWOA, to deny relief to

an employee challenging a restrictive covenant on the basis of a lack of consideration,

will lead to an unreasonable result. First, as detailed above, our Commonwealth has a

long, and virtually uniform, history of strongly disfavoring covenants in restraint of trade.

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While beneficial and necessary in some ways to an employer, our courts have

recognized the unique and heavy burden placed upon an employee in attempting to

earn a living when subjected to a restrictive covenant. Indeed, contracts containing

restrictive covenants are treated as unique in the law, and we find it significant that,

even with respect to a contract under seal, an exception was recognized for contracts

involving a restraint of trade. Gompers, 56 Pa. at 197 (agreement in restraint of trade

“is the only exception to the rule, that a contract under seal imports consideration which

a party is not permitted to deny”); see also Newman v. Sablosky, 407 A.2d 448, 451

(Pa. Super. 1979) (“While a seal to an agreement imports consideration, the rule is

inapplicable in a court of equity [to enforce a restrictive covenant.]”). Moreover, and

consistent with this sui generis approach to agreements in restraint of trade, our courts

have mandated, in the post-commencement employment scenario, strict compliance

with various requirements, including new and valuable consideration, beyond mere

continued employment, to permit enforcement of the restrictive covenant.          Related

thereto, and as can be drawn from the above discussion, our courts aggressively have

reviewed the adequacy of consideration supporting such restraints on trade.

      Upon consideration of the historic background regarding covenants not to

compete, their relative positive and negative impact upon the employer-employee

relationship, and their unique treatment in the law, including more rigorous scrutiny by

our courts, we conclude 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.          1

Pa.C.S.A. § 1922. Moreover, our conclusion is buttressed by the narrow construction

which must be given to the UWOA. 1 Pa.C.S. § 1928(b)(8). Thus, we hold that an

employment agreement containing a restrictive covenant not to compete may be

                                    [J-40-2015] - 19
challenged for a lack of consideration even though the agreement, by its express terms,

indicates that the parties “intend to be legally bound” pursuant to the UWOA.

      The order of the Superior Court is affirmed. Jurisdiction relinquished.

      Mr. Chief Justice Saylor and Messrs. Justice Baer and Stevens join the opinion.

      Mr. Chief Justice Saylor files a concurring opinion.

      Mr. Justice Eakin files a dissenting opinion.

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