Restrictive covenants often rise or fall at the preliminary injunction stage. A Pennsylvania appellate decision shows how two common drafting mistakes can derail an employer’s attempt to enforce a nonsolicitation agreement.
TL;DR: The Pennsylvania Superior Court affirmed denial of a preliminary injunction against departing wealth advisors where the trial court had “apparently reasonable grounds” to question whether a mid-employment nonsolicitation agreement was supported by new consideration and whether the client restriction swept too broadly. The decision highlights two recurring enforcement problems for employers: rolling out restrictive covenants after employment begins without clearly documented consideration, and drafting client restrictions that extend beyond protectable business relationships.
Advisors left for a competitor and the employer asked the court to stop them
The dispute reached the Pennsylvania Superior Court after a trial court denied an employer’s request for a preliminary injunction against several wealth advisors who left to join a competing advisory firm.
The employer alleged that the advisors violated nonsolicitation agreements and orchestrated a coordinated move intended to shift client relationships to the competitor.
On appeal, the only question was whether the trial court had “apparently reasonable grounds” to deny emergency injunctive relief. The Superior Court concluded that it did.
A mid-employment covenant raised a consideration problem
One advisor signed nonsolicitation agreements in 2010 and again in 2014, both after his employment had already begun.
Under Pennsylvania law, restrictive covenants introduced after employment starts must be supported by new and valuable consideration. The court relied on the rule from Socko v. Mid-Atlantic Systems of CPA, Inc. that continued employment alone is insufficient.
The employer argued that the agreements were supported by eligibility for an incentive compensation program and a later salary increase. The trial court rejected that argument. The advisor testified that he had already been participating in the incentive program before signing the first agreement, and the trial court declined to assume that a later $10,000 raise was tied to the covenant rather than a routine pay adjustment.
Pennsylvania courts have recognized several forms of consideration that can support a mid-employment restrictive covenant. As the Pennsylvania Supreme Court explained in Socko, valid consideration can include a promotion, a change in employment status, or meaningful changes to compensation or benefits such as bonuses, insurance coverage, or severance benefits. The employee must receive something new in exchange for the covenant.
A broad client restriction created a second enforcement problem
The employer also faced difficulty with the scope of the client restriction.
The nonsolicitation provision prohibited the advisors from soliciting, diverting, or accepting business from customers or potential customers with whom they had contact during their employment.
The trial court concluded that portions of the clause were overly broad, and the Superior Court determined that the trial court had reasonable grounds to reach that conclusion.
Two aspects of the language drove that concern.
First, the restriction extended to “potential customers.” The trial court reasoned that this language could sweep in individuals whose relationships with the advisors predated their employment with the firm.
Second, the provision contained no geographic limitation. Pennsylvania courts sometimes enforce client-based nonsolicitation agreements without geographic restrictions when the clause is tied to specific client relationships. In this case, the trial court viewed the absence of geographic limits as reinforcing the breadth created by the “potential customers” language.
The appellate court did not hold that the clause was unenforceable. It simply concluded that the trial court had “apparently reasonable grounds” to question the scope of the restriction when denying preliminary injunctive relief.
The record did not show client solicitation
The evidentiary record also weakened the request for emergency relief.
The advisors testified that they had not contacted clients about their departure before or after leaving the firm. The opinion also notes evidence suggesting that some clients learned of the departures after the employer contacted “at risk” clients shortly after the resignations.
Without evidence of solicitation, the employer faced difficulty establishing the immediate harm required for injunctive relief.
Practical lessons for employers using nonsolicitation agreements
Employers that rely on nonsolicitation agreements should keep several practical points in mind, recognizing that restrictive covenant law varies by state.
First, when introducing a restrictive covenant after employment begins, ensure that the agreement is supported by the consideration required under the applicable state law and that the connection between the benefit and the covenant is clearly documented.
Second, draft client restrictions carefully and tie them to legitimate business interests such as protecting client relationships developed through the employee’s work for the company.
Third, remember that injunction requests require evidence. Employers seeking emergency relief should be prepared to show actual solicitation or misuse of protected relationships.
Bottom line
Two familiar mistakes can derail enforcement of a nonsolicitation agreement at the injunction stage: unclear consideration and overly broad client restrictions. This decision shows how quickly those issues can cost an employer the leverage that comes with injunctive relief.