With Pennsylvania Non-Competes, As in Life, Timing is Everything

In Pennsylvania, it has long been known that waiting until after the start of employment to have an employee sign a non-competition agreement comes with the real risk that the agreement will be unenforceable for lack of consideration.  Last week, the Pennsylvania Supreme Court provided definitive guidance on the issue in Rullex Co., LLC v. Tel-Stream, Inc., et al., holding that a non-competition agreement entered into after an employee commences employment fails for lack of consideration unless the essential provisions of those restrictions were agreed to before the employee started work.

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The Philadelphia Area Transitions from Red Phase to Yellow, Allowing More Business Activity

On April 22, Governor Tom Wolf outlined a three-phase plan for reopening Pennsylvania businesses, following a color-coded system: Red, Yellow and Green. As the COVID-19 threat continues to slow, each county has been moving gradually through the phases. According to the Commonwealth, the phases are designed to decrease the continued spread of COVID-19 while relaxing restrictions and promoting the resumption of business activity.

Following is a brief description of each phase:

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Pennsylvania Grants Waivers Allowing Non-‘Life-Sustaining’ Businesses to Resume Operations

On March 19, 2020, Governor Tom Wolf ordered all Pennsylvania businesses that are not considered “life-sustaining” to shut down their physical operations by March 21 at 12:01 a.m., which was later amended to March 23, 2020 at 8 a.m. Governor Wolf’s order will remain in effect until further notice. Although there are several industries that are listed as non-life sustaining, the Pennsylvania Department of Community and Economic Development (DCED), has granted several waivers permitting specific businesses in industries that are not life sustaining to continue operating. For example, although construction companies generally must cease construction, they are permitted to construct health care facilities and conduct emergency repairs.

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Pennsylvania to Establish Small Business Loan Program for Businesses Impacted by COVID-19

On March 25, 2020, Governor Tom Wolf announced a $60 million COVID-19 Working Capital Access Program (CWCA), administered by the Pennsylvania Industrial Development Authority (PIDA), to provide loans of up to $100,000 for small businesses within the Commonwealth adversely impacted by the COVID-19 epidemic.

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Governor Wolf Issues “Stay at Home” Order for Certain Pennsylvania Counties

Updates:

  • 3/27/2020: Governor Wolf has amended his order to include residents of Berks, Butler, Lackawanna, Lancaster, Luzerne, Pike, Wayne, Westmoreland, and York Counties. The amended order is available here.
  • 3/25/2020: Governor Wolf has amended his order to include residents of Northampton and Lehigh Counties. The amended order is available here.
  • 3/24/2020: Governor Wolf has amended his order to include residents of Erie County, in addition to the seven counties previously impacted. The amended order is available here.

Original Post:

Effective Monday, March 23, 2020 at 8:00 p.m., residents in Philadelphia, Allegheny, Bucks, Chester, Delaware, Monroe, and Montgomery counties are required “to stay at home except as needed to access, support or provide life-sustaining business, emergency or government services.”  Residents are permitted to “engage in outdoor activities,” but gatherings are prohibited, and anyone leaving home must practice social distancing and other mitigation efforts.

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Pennsylvania Businesses Ordered to Shut Down their Physical Operations If Not “Life Sustaining”

UPDATES

  • 3/20/2020: The Wolf administration has updated the list of what it deems a “life sustaining” business. The updated list is here. Business now identified as life sustaining that were not previously included include: forestry, logging, and support activities; mining (including coal and metal ore mining) and support activities; specialty food stores; insurance carriers and related activities (except in-person sales brokerage); insurance and employee benefit funds; accounting, tax preparation, bookkeeping, and payroll; traveler accommodation; and dry cleaning and laundry services. Businesses that were previously designated as “life sustaining” but no longer carry that designation (and therefore must close in-person facilities) include beer, wine, and liquor stores (except beer distributors) and civic and social organizations. The governor’s press release announcing the updates is here. The administration has made clear that this is “an evolving situation and decisions will continue to be made and revisited as needed.”
  • 3/20/2020: Businesses seeking an exemption to the closure Order may do so via this website. Businesses are required to provide a justification as to why the operation is “life-sustaining,” and must state the number of employees required to be on-site to perform the “critical work.” Businesses must also describe plans to comply with CDC guidelines and mitigation efforts.
  • 3/21/2020: Governor Wolf amended the enforcement deadline from his original shutdown Order. Enforcement on non-compliant businesses will begin Monday, March 23 at 8:00 a.m., and not on Saturday, March 21, as previously ordered.
  • 3/21/2020: The Department of Community and Economic Development has issued a set of Frequently Asked Questions and responses to provide additional guidance regarding Governor Wolf’s shutdown Order. The FAQ responses indicate that authorities should make compliance determinations based on the operations of a particular facility, rather than the business as a whole. For example, construction businesses (which are identified as non-“life sustaining”) may continue working on road repair and similar emergency efforts, but must suspend other activities that are not “clearly authorized” as life sustaining. Further, in response to a question about whether businesses may “maintain limited in-person essential personnel for security, processing of essential functions, or to maintain compliance with federal, state or local regulatory requirements,” the DCED states that businesses suspending physical operations pursuant to the Order “must limit on-site personnel to maintain critical functions,” while following social distancing and other mitigation guidelines. The FAQ responses also indicate that enforcement “should be prioritized to focus on businesses where people congregate,” and that although enforcement measures are within the discretion of the state or local agency, the administration expects that enforcement will be progressive, and will start first “with a warning to any suspected violator.” The FAQ responses also clarify that hotels and motels, as well as local governments and municipalities, are not required to cease physical operations.

On Thursday, March 19, 2020, Pennsylvania Governor Tom Wolf ordered all Pennsylvania businesses that are not “life sustaining” to shut down physical operations by Saturday, March 21 at 12:01 a.m.  A copy of the Order is here.  Such business may continue to operate on a virtual or telework basis, “so long as social distancing and other mitigation measures are followed.”

The Order specifically exempts “life sustaining businesses,” which may remain open subject to those businesses undertaking the same social distancing and mitigation measures.  Similarly, the Order allows “businesses that offer carry-out, delivery, and drive-through food and beverage service” to continue operations, subject to the same social distancing and mitigation measures.  The Order incorporates a list of life and non-life sustaining businesses, which can be found here.

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