Socko v. Mid-Atlantic Systems of CPA, Inc.
99 A.3d 928
Pa. Super. Ct.2014Background
- Socko was hired by Mid-Atlantic in 2007 and signed initial employment agreements containing two‑year non‑competes; he resigned and was rehired in 2009 and signed another non‑compete.
- While an at‑will employee, Socko signed a third Non‑Competition Agreement on December 28, 2010, containing a two‑year geographic restriction and an "intend to be legally bound" clause; it superseded prior agreements.
- Socko resigned January 16, 2012, took similar work with a competing company, and was later terminated after Mid‑Atlantic threatened litigation based on the Non‑Competition Agreement.
- Socko filed suit for declaratory judgment arguing the December 2010 non‑compete was unenforceable for lack of consideration; Mid‑Atlantic relied on the Uniform Written Obligations Act (UWOA) language in the contract.
- The trial court granted partial summary judgment for Socko, finding the post‑hire covenant lacked adequate consideration and therefore was unenforceable; Mid‑Atlantic appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a non‑compete added after employment is enforceable absent new consideration | Socko: post‑hire non‑compete is unenforceable unless employee receives a corresponding benefit or change in status | Mid‑Atlantic: UWOA "intend to be legally bound" statement supplies consideration by statute | Court: Post‑hire non‑compete unenforceable for lack of valuable consideration despite UWOA language |
| Whether UWOA can substitute for the type/quality of consideration required for employee non‑competes | Socko: UWOA does not supply the substantive, valuable consideration courts require for restrictive covenants | Mid‑Atlantic: UWOA eliminates need to prove consideration if contract states intent to be legally bound | Court: UWOA cannot cure the special substantive consideration requirement for restrictive covenants |
Key Cases Cited
- Morgan's Home Equip. Corp. v. Martucci, 136 A.2d 838 (Pa. 1957) (historical rule: restraints of trade disfavored; covenants ancillary to employment may be enforceable)
- Barb‑Lee Mobile Frame Co. v. Hoot, 206 A.2d 59 (Pa. 1965) (initial employment constitutes consideration for a covenant in the original employment contract)
- Capital Bakers, Inc. v. Townsend, 281 A.2d 292 (Pa. 1971) (post‑hire covenant unenforceable where no change in employment status)
- Jacobson & Co. v. Int'l Env't Corp., 235 A.2d 612 (Pa. 1967) (post‑hire covenant may be enforceable when supported by a change in status or other new consideration)
- Maintenance Specialties, Inc. v. Gottus, 314 A.2d 279 (Pa. 1974) (reaffirming need for valuable new consideration for post‑hire covenants)
- George W. Kistler, Inc. v. O'Brien, 347 A.2d 311 (Pa. 1975) (continued at‑will employment, seal, or nominal consideration inadequate for post‑hire covenant)
- Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425 (Pa. 2004) (UWOA interpretation: written statement of intent to be legally bound affects consideration analysis generally)
- Pulse Techs., Inc. v. Notaro, 67 A.3d 778 (Pa. 2013) (reaffirming principles that an initial employment agreement can supply consideration and later agreements require new consideration)