Third Circuit Indicates Support for Use of Broader Restrictive Covenants in Post-Hire Agreements Rather Than a Uniform Approach at Hiring

Kevin M. Passerini

We wrote an earlier post about the Third Circuit’s opinion in ADP, LLC v. Rafferty, et al., confirming courts’ blue penciling authority (see here); but the Third Circuit’s analysis of ADP’s two-tiered restrictive covenant structure is also worth discussing, as it may have employers doing some head scratching.

Why the focus on ADP’s two-tiered contracting approach?

ADP’s first-tier agreements for new hires included confidentiality obligations and a one-year customer non-solicit tailored to the employee’s assigned role and contacts, but no non-compete. ADP’s second-tier agreements (used in connection with stock incentives offered to high-performing employees) added a one-year territory-based non-compete and broadened the scope of the one-year non-solicit to include all customers and business partners for which ADP has provided services and all prospects for which ADP reasonably expects to provide services during the two-year period following the employee’s termination—regardless of the employee’s responsibility for them or access to confidential information about them during employment. Continue reading “Third Circuit Indicates Support for Use of Broader Restrictive Covenants in Post-Hire Agreements Rather Than a Uniform Approach at Hiring”

We Are Hiring: PA Superior Court Upends the Law on “No Hire” Agreements

Scott F. Cooper

Countless companies contract with other companies to provide services and include a “no hire” provision (pursuant to which the parties to the contract agree to not hire employees of the contracting company) in the service contract. The goal of these provisions is to prevent the contractual business partner from raiding the other’s talent—at least not without paying a fee.

In what the Court acknowledged was the first test of this issue in Pennsylvania, earlier this month the Superior Court invalidated a “no hire” agreement between companies—even though they were not competitors. The Court reasoned that companies may enter into agreements barring solicitation of customers, but they cannot agree to “no hire” provisions. Non-compete agreements between employer and employee are still valid, but not via company-to-company “no hire” clauses. Continue reading “We Are Hiring: PA Superior Court Upends the Law on “No Hire” Agreements”