No-Hire Agreements are not Enforceable
Pennsylvania Invalidates “No-Hire” Agreement
In another win for employees, the Pennsylvania Supreme Court recently struck down a “no-hire” agreement between two unrelated corporations. See Pittsburgh Logistics Systems, Inc. v. Beemac Trucking, LLC, Case No. 31 WAP 2019 (Penn. Supreme Court, April 29, 2021). The case is notable for many reasons including the fact that the contract at issue was not a franchise agreement and was entered into by two companies that were not part of an affiliated corporate group.
“No-hire” agreements, also called “no-poach” and “no-switch” agreements, are disastrous for workers. Unfortunately, such agreements are common in the restaurant and hospitality industries, particularly in franchise arrangements. No-hire or no-poach agreements prevent workers from being hired by companies or by other franchise locations. This makes it even more difficult for workers to find employment. Some no-poach agreements go even further and prevent workers from even being solicited or considered for hire by an affiliated company. Worse still, many no-poach agreements extend beyond the point at which a worker is terminated or quits, often for years. For example, the no-hire provision in Pittsburgh Logistics extended for two years past the end of a workers’ employment. Workers’ rights are significantly undercut by these sorts of agreements since workers cannot move between restaurants or hotels in the same chain even though the workers possess the necessary skills and experience.
Most often, no-hire agreements are made between affiliated companies. But, as the Pittsburgh Logistics case demonstrates, no-hire agreements can be made between unaffiliated companies. These types of agreements are even more pernicious.
Many states — like California and Washington — have banned such agreements as unlawful restraints on employment. Under pressure from state regulators, many companies have also agreed not to enter into no-hire/no-poach agreements. McDonald’s, Jimmy Johns, and Arby’s are some of the examples. If you suspect you have been denied work because of a no-hire/no-poach agreement, you should immediately seek the advice and counsel of experienced employee rights attorneys like those at Herrmann Law. You have rights that can be vindicated in a court of law.
With this latest case, Pennsylvania has now joined the list of states pushing back against no-hire/no-poach agreements. In the Pittsburgh Logistics case, a shipping broker entered into a contract with one of its trucking company customers that included a no-hire provision. The provision barred the trucking company from directly or indirectly hiring or soliciting for employment any employee of the broker (or any of its affiliates). After four of the broker’s employees went to work for the trucking company, the broker sued to enforce the no-hire provision of the agreement.
At the trial level, the court refused to enforce the no-hire provision of the agreement. The court held broadly that the provision was against the public policy of the Commonwealth of Pennsylvania.
On appeal, the Pennsylvania Supreme Court agreed in part. The Supreme Court agreed with the trial court that the provision at issue was unenforceable, but made a narrower ruling that this particular no-hire provision was too broad. The court held that, since the no-hire provision covered all employees, the provision’s breadth was far greater than what was necessary to protect the broker’s legitimate business interests. Further, given that the provision extended for two years beyond the end of employment, the provision imposed a significant restraint of employment on third-parties — the four workers — who were not parties to the agreement. The injuries imposed on the workers was far greater than any benefit realized by the broker. All in all, the court gave the “win” to the employees and affirmed that the no-hire provision was unenforceable.
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For more information, call the Employee Rights attorneys at Herrmann Law. If you think that your employer has violated your rights as an employee, call us. We are proven, experienced, employee-focused attorneys representing workers across the United States in all types of workplace disputes. Use our Online Contact page or call us at (817) 479-9229.