Reprinted with permission from the October 14th edition of The Legal Intelligencer. (c) 2022 ALM Media Properties. Further duplication without permission is prohibited.

Employers eager to recapture the costs of hiring foreign citizens often use damages or repayment provisions in employment agreements. A recent case in the Southern District of New York illustrates a challenge to that strategy. The Southern District’s recent decision in Baldia v. RN Express Staffing Registry LLC to allow a complaint under the federal Trafficking Victims Protection Act (“TVPA”) to proceed, is part of a growing trend in using the TVPA to challenge such agreements.

The plaintiff in the Baldia case, Marie Alexandrine Baldia, is a citizen of the Philippines. RN Express Staffing recruited her from the Philippines and hired her as a registered nurse supervisor after sponsoring her visa to work in the United States. Baldia signed an Employment Agreement for a three-year term, that included a liquidated damages provision. Specifically, the Employment Agreement required that in the event Baldia left the employ of RN Express Staffing, “without cause”, before the end of the three-year term, she would need to repay the costs of “recruiting, training and placement”. The Employment Agreement recited that the “Company Recruitment Costs” totaled $33,320, and that the number would be reduced after her first full year of employment.

Restrictions against competition are frequently included in employment agreements and agreements for the sale of business assets or stock.  The restriction against competition is designed to secure a time period for the employer or buyer of business assets, as the case may be, during which the employer/buyer is free from competition for a departed employee or seller so as to facilitate the transition and better protect their own business assets and customer relationships.  If properly drafted and implemented, restrictions against competition are enforceable under Pennsylvania law.

The primary method of enforcement in the event of breach is a preliminary injunction in equity.  In order to prevail on a petition for preliminary injunction, a petitioner must demonstrate several factors including (1) the need to prevent irreparable harm which cannot be compensated by money damages, (2) that more harm will result from the denial of the preliminary injunction than from granting same, (3) that the injunction will restore the parties to the status quo, (4) the likelihood of success on the merits, (5) that the injunction is designed to abate the offending activity, and (6) that the injunction will not negatively impact public policy.   In most cases the issues of likelihood of success on the merits and irreparable harm incapable of compensation with money damages represent the contested issues.

In Bucks County, the petition for preliminary injunction must be accompanied by a verified complaint and an order for hearing.  The petition is often, though not always, heard by the initial pre-trial judge assigned to the case at the time of filing.  Court administration reviews all petitions for preliminary injunction and assigns the presiding judge, courtroom and date for evidence to be taken.  The order for hearing is an essential aspect of the petition; without it, no hearing will be scheduled.

The petitioner in any injunction matter bears a heavy burden.  Adequate evidence as to the need for enforcement of the covenant, the potential irreparable harm and right to relief must be presented.  Because the entry of injunctive relief is an extraordinary remedy, the evidence must be clear and persuasive.  In employment and business asset transfer cases, the language of the restriction in the applicable agreements must be constrained to those aspects of competition which are reasonably necessary for the protection of the employer/buyer.  For example, a covenant which is overbroad in terms of geography, time or scope will not be enforced.

Preliminary injunctive relief may be acquired in the Bucks County Court of Common Pleas if supported by the underlying agreement and if properly perfected under the practices and procedures employed in the County.