Employment Law Update May 2021
May 2021 brought a welcome change in the weather and two interesting Supreme Court rulings that could impact Pennsylvania businesses.
- U.S. Supreme Court ruling permits Philadelphia-based Uber drivers to take Uber to trial over allegations of improper worker classification. The drivers, who work under Uber’s higher-end “UberBlack” service, allege that Uber misclassified them as independent contractors to deny them proper minimum wage and overtime wages. Earlier in the case, the U.S. District Court granted summary judgment to Uber, holding that the drivers could not meet their burden to show that they were employees under the Fair Labor Standards Act (“FLSA”) or Pennsylvania wage-and-hour laws, effectively upholding Uber’s classification of the drivers as independent contractors. The District Court cited in support of its decision that the drivers were entitle to make their own hours, worked as much or as little as they wanted, and largely invested in their own equipment. The drivers appealed to the Third Circuit, which reversed the District Court, holding that other factors could alter the outcome of the case that needed to be resolved through a trial. These factors included whether Uber exerted “control” over its drivers tasks and whether the drivers had opportunity for profit or loss depending on their own managerial skill. The U.S. Supreme Court this month declined to hear Uber’s appeal from the Third Circuit ruling, setting the stage for a trial on the merits. Accordingly, the decision of an eastern Pennsylvania jury could have nationwide effects on the ride-hailing industry.
- Pennsylvania Supreme Court holds “No Poach” Agreement Unenforceable. A “no-poach agreement” is an agreement between employers not to hire or solicit to hire each other’s employees. By way of example, these agreements may be put in place where employees from multiple companies collaborate together in a joint venture, and the companies do not want the other businesses to use the venture as an opportunity to recruit their best employees. In a decision that could have far-reaching impacts for Pennsylvania businesses, the Court ruled in Pittsburgh Logistics Systems Inc. v. Beemac Trucking LLC, No. 31 WAP 2019, J-32-2020, 2021 WL 1676399, 2021 Pa. LEXIS 1853 (Apr. 29, 2021), that one-such arrangement was unenforceable. Pittsburgh Logistics Systems (“PLS”) is a freight broker, and its agreement sought to forbid the carriers with which it entered into formal service contracts from hiring or soliciting PLS’ employees anywhere in the world for the length of the contract plus two years. Notably, PLS introduced no evidence that the relevant employees had ever had direct contact with the relevant carrier. The Court condemned the lack of consent of the affected employees and the failure to provide the employees with consideration. The Court also applied a public policy test, noting harm to the general public through non-competition. While the case does not suggest an outright ban on no-poach agreements in Pennsylvania, it underscores that such agreements are disfavored and that businesses will need to demonstrate a compelling reason for putting these agreements in place.
Jeff Burke is an attorney at MacElree Harvey, Ltd., working in the firm’s Employment and Litigation practice groups. Jeff counsels businesses and individuals on employment practices and policies, employee hiring and separation issues, non-competition and other restrictive covenants, wage and hour disputes, and other employment-related matters. Jeff also represents businesses and individuals in employment litigation such as employment contract disputes, workforce classification audits, and discrimination claims based upon age, sex, race, religion, disability, sexual harassment, and hostile work environment.