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Court Restricts Restrictive Covenant in Employment Contract (PA)

May 12, 2016

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In <em>Lehigh Anesthesia Association vs. Mellon</em>, a Philadelphia Superior Court issued an opinion on appeal, granting summary judgment on behalf of a nurse, Michael Mellon, who had been sued by his former employer for violation of a restrictive covenant in his employment agreement.
Michael Mellon began working for Lehigh Anesthesia Association in 2001 as a certified nurse anesthetist.  His employment agreement contained a restrictive covenant that prohibited him from working for any entity that had entered into a contract with LAA within four years prior to termination of his employment agreement. Although the covenant did not bar Mellon as to geographic area, it limited his ability to render services to any of the defined clients for up to two years after termination.
In May 2012, LAA terminated Mellon’s employment based on complaints of poor work performance and behavior. Mellon thereafter began working for Professional Anesthesia Consultants, which provided services to Carlisle Endoscopy Center, a client of LAA from 2001-2011.
LAA filed a complaint alleging a breach of its restrictive covenant against Mellon on February 28, 2013. In Pennsylvania, for a restrictive covenant to limit competition to be enforceable: it “must be: (1) ancillary to the employment relationship; (2) reasonably necessary for the protection of the employer; and (3) reasonable in duration and geographic reach.” Agreements are considered ancillary if they pertain to the employment relationship. So long as the employment restriction is “an auxiliary part of the taking of employment and not a later attempt to impose additional restrictions on an unsuspecting employee, such a covenant is supported by valid consideration and is therefore enforceable.” In Pennsylvania, post-employment restrictive covenants are subject to a higher level of scrutiny. Under this the additional scrutiny, reasonableness is determined by whether a covenant is necessary to protect particular business interests such as trade secrets or highly specialized employee training by an employee; the protection must extend beyond the mere elimination of competition.
In affirming summary judgment for Mellon, an appeals court held that the covenant was broader than necessary to protect LAA’s business interests and placed an undue hardship on the nurse in finding future employment. Notably, the lack of geographic scope added to the over-breadth of the covenant, and the court found that LAA’s broad interpretation of the term clients to include any entities with whom LAA had contracted within two years of termination, would unduly restrict the nurse’s potential employers.
Thanks to Sathima Jones for her contribution.
For more information, contact Denise Fontana Ricci at <a href=""></a>.


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