It is a familiar scene to many employers. After searching for the right individual to fill an important position, a promising candidate emerges. The new employee will have top-level access to confidential information and customers, and their offer letter anticipates that the employee will sign restrictive covenants including noncompetition and nonsolicitation agreements as a condition of employment. Current operations are a bit chaotic—including some remote work—so the agreement isn’t provided prior to the first day of employment. The employee knows they will have to sign eventually, but the employer doesn’t press the issue and allows time for the new employee to review the terms. Is this a valid and enforceable restrictive covenant agreement?  According to the Pennsylvania Supreme Court’s June 16, decision in Rullex v. Tel-Stream, the answer is no.

A restrictive covenant such as a noncompetition or nonsolicitation agreement is a contract that must be supported by adequate consideration to be enforceable in Pennsylvania. Pennsylvania views starting a new job as sufficient consideration, provided that the agreement is executed at the start of the employment relationship. In Rullex, the subcontractor in question was aware that a non-competition agreement would be required as part of the relationship, in which the subcontractor would be performing cellphone tower work for a telecommunications company. Although the subcontractor was given a copy of the agreement on his first day of work, he was allowed to take time to review it and did not return a signed copy until at least two months later. The subcontractor later performed cellphone tower work for a competitor of the telecommunications company, resulting in a lawsuit seeking to prevent him from working with that competitor or any other competitors of the telecommunications company.