PA SUPREME COURT AGREED TO CONSIDER VALIDITY OF RESTRICTIVE COVENANT SIGNED AFTER EMPLOYMENT BEGAN
The Pennsylvania Supreme Court is set to determine whether a restrictive covenant discussed, but not physically signed, prior to the start of work can be enforceable without an offer of additional consideration.
The state Superior Court in Rullex Co. v. Tel-Stream held Jan 11 that it cannot.
“References to non-compete clauses found in unsigned draft agreements are not binding on the parties,” Judge Judith Ference Olson wrote for a unanimous three-judge panel in a memorandum opinion. “Thus, since the written contact upon which appellant relies was executed after Tel-Stream commenced work, the trial court correctly determine that new and valuable consideration, beyond mere continued work, was needed to support the restrictive covenant. Appellant has not come forward with evidence of such new and valuable consideration beyond the original award of cellular tower work. Thus, appellant is unlikely to succeed based on any claim asserting an enforceable restrictive covenant.”
In a one-page Sept. 10 order granting allocator, the Supreme Court agreed to consider two issues: “Did the Superior Court err as a matter of law when it determined that a restrictive covenant is only enforceable if it is physically executed before an employee begins his employment despite the agreement being contemplated prior to the commencement of employment? (2) Did the Superior Court exceed its scope of review when it based its opinion on an argument raised by the court sua sponte.
References: Zack Needles, Of the Law Weekly, Pennsylvania Law Weekly, 42 PLW 875, Tuesday, September 17, 2019, Rullex Co. vs. Tel-Stream
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