On April 19, 2017, a Pennsylvania appeals court ruled that conversion to at-will employment after the end of a contract does not relieve employees of a non-solicitation provision. This opinion overturns a trial court decision against Metalico Pittsburgh, Inc., a scrap metal broker.
 
Metalico Pittsburg, Inc. sued former employees Douglas Newman and Ray Medred after they left for rival Allegheny Raw Metals, Inc., and began soliciting Metalico’s customers. At the start of their employment in 2011, Newman and Medred signed three-year contracts which included non-solicitation provisions that would last for one or two years after they left Metalico, depending on whether their separation was voluntary. After the employment contracts expired in 2014, the employees continued to work as at-will employees with new employment terms until 2015.  

After Metalico sued, an Alleghany County Court of Common Pleas judge ruled in favor of Newman and Medred, finding the provisions unenforceable because there was a failure of consideration. On appeal, the Superior Court held that the employment contracts contained language that anticipated that the employees would be covered by the covenants both after the initial contract ended and after they left the company. The court explained that this provision was part of the full bargain, and that the employees received full compensation and other bargained-for consideration.
 
This holding presents a major departure from Pennsylvania’s long-standing animosity toward restrictive covenants in employment contracts.  The practical result of this holding favors employers because the employees lost the protections of the agreement, but had to abide by their post-employment obligations. 
 
The case is Metalico Pittsburgh, Inc. v. Newman, et al., No. 354 WDA 2016 (Apr. 19, 2017) and the opinion is available here.?