Non-Compete Agreement in PA

[mikephel]

Question regarding non-compete agreement in Pennsylvania
Briefly, here's the scenario
1. Employee works of a third party employer (W2). Third party company has "Limited Non-Solicitation Clause"
".....restricted from joining the Company’s customer, in whose project, you were assigned to work at the time of the separation for a period of 3 months"
2. Third party does not provide vacation days, pays lower wage, does provide insurance, and will terminate you within 2 weeks if client does not renew contract or fund runs out or no project
3. Employee found another job/position with other department under the same client company (direct) - separate project and position
4. Recently, FTC Announces Rule Banning Noncompete.

Is such non-compete agreement enforceable or legal? Can the third party hold the employee from joining the client company directly (different project/department/position)?

 

[LdiJ]

Question regarding non-compete agreement in Pennsylvania
Briefly, here's the scenario
1. Employee works of a third party employer (W2). Third party company has "Limited Non-Solicitation Clause"
".....restricted from joining the Company’s customer, in whose project, you were assigned to work at the time of the separation for a period of 3 months"
2. Third party does not provide vacation days, pays lower wage, does provide insurance, and will terminate you within 2 weeks if client does not renew contract or fund runs out or no project
3. Employee found another job/position with other department under the same client company (direct) - separate project and position
4. Recently, FTC Announces Rule Banning Noncompete.

Is such non-compete agreement enforceable or legal? Can the third party hold the employee from joining the client company directly (different project/department/position)?

A non-solicitation clause would not normally prevent the employee from taking a job with the client company, but would rather prevent the client company from hiring a worker that was placed with them through the third party company. It is part of the contract between the client company and the third party company.

A non-compete clause is what would prevent the employee from taking a job with the client company. That is a contract between the employee and the third party company.

You have used both phrases in your post but they are two separate things. The FTC ruling is about non-compete clauses. There is also the issue of the ruling not applying to "senior executives". Would you fall in that catagory?

 

[adjusterjack]

Recently, FTC Announces Rule Banning Noncompete.

Enforcement of the FTC ruling has been blocked by two federal courts - Florida and Texas. Appeals are in progress.

FTC Announces Rule Banning Noncompetes | Federal Trade Commission

Breaking Down the FTC Non-Compete Ban Appeals: Heading to a Circuit Split and SCOTUS Intervention? | Fisher Phillips

Pennsylvania courts consider several factors when determining the enforceability of a non-compete agreement:

• Geographic Scope: The restriction’s geographic scope should be limited to the area where the employer conducts business or where the employee’s influence was significant.
• Duration: The agreement’s duration should be reasonable and based on the time required to protect the employer’s legitimate interests. Typically, non-competes lasting more than one to two years may be scrutinized more closely.
• Type of Employment: The nature of the employee’s job and the specific business interests being protected will be taken into account. High-level executives may have broader restrictions compared to lower-level employees.
• Consideration: The adequacy of consideration offered to the employee in exchange for signing the agreement will be evaluated.

Google Pennsylvania non compete for more information.

Aside from possible lack, or inadequacy, of consideration, I (who abhors non competes) think that 3 months and one employer may be found reasonable by a Pennsylvania court.

Keep in mind that my two cents worth did not involve reading your entire employment contract. There may be other factors involved.

 

[zddoodah]

Employee works of a third party employer (W2). Third party company has "Limited Non-Solicitation Clause"

What does "third party employer/company" mean? "Limited Non-Solicitation Clause" in what? Are you the employee in question?

".....restricted from joining the Company’s customer, in whose project, you were assigned to work at the time of the separation for a period of 3 months"

Providing partial quotes isn't helpful. This isn't even a complete sentence.

pays lower wage

"Lower" than what?

Employee found another job/position with other department under the same client company (direct) - separate project and position

The bullet point format you used makes it difficult to understand your situation. You seem to have focused on writing as few words as possible at the expense of clarity.

Is such non-compete agreement enforceable or legal?

"Non-compete"? Or "Limited Non-Solicitation Clause"? Non-solicitation clauses and "noncompetes" are not the same thing. This article at the FTC website explains the rules enacted earlier this year and contains a number of links. If you want an informed analysis of how these rules might apply in your situation, you'll need to explain the relevant facts clearly.

 

[quincy]

Could you please clarify: Is the employee simply changing departments within the same company, covered by the same non-compete/no-solicitation agreement?

 

[mikephel]

A non-solicitation clause would not normally prevent the employee from taking a job with the client company, but would rather prevent the client company from hiring a worker that was placed with them through the third party company. It is part of the contract between the client company and the third party company.

A non-compete clause is what would prevent the employee from taking a job with the client company. That is a contract between the employee and the third party company.

You have used both phrases in your post but they are two separate things. The FTC ruling is about non-compete clauses. There is also the issue of the ruling not applying to "senior executives". Would you fall in that catagory?

Thank you. The employee is not in that category. No non-compete statement in the offer letter. Only the following statement in the original offer letter:
Limited Non-Solicitation Clause.
You are restricted from enticing any fellow associate/employee of the company for period of 3 months from the date of separation from the company
You are restricted from joining the company's customer, in whose project, you were assigned to work at the time of the separation for a period of 3 months from the date of separation. The company reserve the express and unilateral right to relieve you from the obligation.
In the event of involuntary termination or redundancy, there shall be no restriction on you joining the company's customer.

The position is with another department within the company. Separate project and position. The client contract does not mention anything about non-solicitation.

Thank you everyone for the inputs. Really appreciate that

 

[LdiJ]

For those of you who are not familiar with temporary agencies:

Normally a temporary agency has a set up where after a certain number of months a client company may hire an employee directly. There is often a fee payable to the temp agency that is associated with this. The contract between the temp agency and the client company normally has a no solicitation clause that spells that out. In addition the temp agencies normally require their employees to sign a no compete contract that stops them from applying to directly work for the company unless it is also through that proceedure.

The employee in this thread wants to apply for a different job within the client company than the one that he is performing now. He/she is hoping that the combination of it being a different job, plus the FTC ruling will allow that to happen despite any contract in place.

However, he is not being clear as to whether or not he wants to apply and is afraid of being sued by the temp agency, or whether the client company doesn't want to consider him for the job because they are afraid of being sued by the temp agency. It could be either or both.

I am not sure whether the FTC ruling would apply to contract between a temp agency and a client company or not. I think that an employment attorney would need to weigh in on that.

I also think that an employment attorney would need to weigh in as to whether or not the FTC ruling would apply to a situation where the employer is a temp agency.

 

[LdiJ]

Thank you. The employee is not in that category. No non-compete statement in the offer letter. Only the following statement in the original offer letter:
Limited Non-Solicitation Clause.
You are restricted from enticing any fellow associate/employee of the company for period of 3 months from the date of separation from the company
You are restricted from joining the company's customer, in whose project, you were assigned to work at the time of the separation for a period of 3 months from the date of separation. The company reserve the express and unilateral right to relieve you from the obligation.
In the event of involuntary termination or redundancy, there shall be no restriction on you joining the company's customer.

The position is with another department within the company. Separate project and position. The client contract does not mention anything about non-solicitation.

Thank you everyone for the inputs. Really appreciate that

It sounds like you are restricted from taking any job with the client company for three months after termination of your assignment. That is pretty standard in the industry. I think an employment attorney would need to weigh in as to whether or not the FTC ruling applies to this kind of situation.

 

[quincy]

… The position is with another department within the company. Separate project and position. The client contract does not mention anything about non-solicitation.
…

Thank you for clarifying.

Probably the fastest way to find out if a new position within the same company would violate the contract you signed is to direct your question to the legal department/legal counsel of your employer.

 

[mikephel]

For those of you who are not familiar with temporary agencies:

Normally a temporary agency has a set up where after a certain number of months a client company may hire an employee directly. There is often a fee payable to the temp agency that is associated with this. The contract between the temp agency and the client company normally has a no solicitation clause that spells that out. In addition the temp agencies normally require their employees to sign a no compete contract that stops them from applying to directly work for the company unless it is also through that proceedure.

The employee in this thread wants to apply for a different job within the client company than the one that he is performing now. He/she is hoping that the combination of it being a different job, plus the FTC ruling will allow that to happen despite any contract in place.

However, he is not being clear as to whether or not he wants to apply and is afraid of being sued by the temp agency, or whether the client company doesn't want to consider him for the job because they are afraid of being sued by the temp agency. It could be either or both.

I am not sure whether the FTC ruling would apply to contract between a temp agency and a client company or not. I think that an employment attorney would need to weigh in on that.

I also think that an employment attorney would need to weigh in as to whether or not the FTC ruling would apply to a situation where the employer is a temp agency.

Thank you. I think you described the situation better than I did. I apologize for not describing it more clearly before, and I appreciate your input

 

[mikephel]

Could you please clarify: Is the employee simply changing departments within the same company, covered by the same non-compete/no-solicitation agreement?

Yes, different department within the same company. It is unclear if it is covered by the same same non-compete/no-solicitation agreement.
It says "You are restricted from joining the company's customer, in whose project, you were assigned...."
it sounds like it refers to the client's company instead of department/hiring manager/director.

 

[mikephel]

It sounds like you are restricted from taking any job with the client company for three months after termination of your assignment. That is pretty standard in the industry. I think an employment attorney would need to weigh in as to whether or not the FTC ruling applies to this kind of situation.

Seems like that is the case. Unless being terminated by the third party or if the current position is no longer available based on the clause. Thank you