Q.  Can two business entities agree not to hire each other’s employees?

A.  On January 11, an en banc panel of the Superior Court of Pennsylvania affirmed a trial court’s decision declaring that a no-hire provision in a commercial contract between two businesses was void and unenforceable under Pennsylvania law. Over the past 18 months, no-poach and no-hire provisions have received nationwide attention for their effects on employees’ wages and mobility. They have been attacked by antitrust authorities, politicians and the plaintiffs’ bar as illegal agreements under state and federal antitrust laws. But the Superior Court’s analysis of the no-hire provision under common law — not antitrust law — may have more far-reaching ramifications for commercial contracting in Pennsylvania, as it could make all no-hire provisions unenforceable. In its opinion, the Superior Court departed from other authority holding that ancillary no-hire provisions between commercial parties are generally enforceable so long as they protect a party’s legitimate interest and are reasonable in scope and duration. This case is worth watching to see if it is appealed and, if so, whether the Pennsylvania Supreme Court allows the decision to stand.

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