Originally written by Katelin Kennedy
Hiring a new employee from a competitor or taking a job with a competitor can expose you to significant liability. Whether you are the company poaching a competitor’s employee or the new hire looking to take a sweet job offer, you can reduce the risks of being sued. Here are some best practices:
Identify potential land mines before offering (or accepting) the job
Determine whether the candidate is bound by existing contracts with post-employment restrictions, including any non-compete or non-solicitation provisions that continue beyond the end of the employment relationship. The employment agreement is the obvious first place to look, but post-employment restrictions may be included in other agreements. Be sure to check the employment agreement and all other agreements between the candidate and current employer (e.g., stock option agreements, bonus and other benefit plans, employee handbook).
If the candidate’s contract(s) do include post-employment restrictions, get a legal assessment. A employment lawyer can properly advise you regarding the scope and enforceability of any existing restrictions, as well as the likelihood that the employee would actually violate the restrictions if he or she were to begin a given position with your company.
After understanding the scope and enforceability of the existing post-employment restrictions, consider the likelihood of litigation based on the facts and circumstances. The competitor may have a viable legal claim, but the likelihood that they would pursue a claim against you or the new hire may be low depending on the circumstances. For example, it’s less likely that a smaller company that is going out of business and winding down operations will have the money or motivation to pursue a claim related to your hiring of one of their employees. Here are a few examples of circumstantial considerations that may be relevant:
Is the former employer a direct competitor? Does your company have a friendly relationship with the competitor?
Has your company hired employees from this competitor before?
Does this competitor have a known history of litigating to enforce post-employment restrictions?
Does the candidate regularly interact with high-value customers who would be willing to begin doing business with your company?
Is the candidate departing on good or bad terms?
Will the candidate’s position with your company be substantially similar as his/her position with the former employer?
Reduce the risk of getting sued if you decide to hire the candidate (or accept the job)
Modify the candidate’s position or duties for a period of time to avoid violating post-employment restrictions. For example, the candidate may not be able to work with certain products or customers until a restrictive period is over.
Ask the candidate to request a waiver of his post-employment restrictions. Depending on the circumstances, the former employer may agree to a waiver, or at least a waiver to some extent.
The candidate should not use any equipment or accounts (cell phone, email) that are owned or maintained by the former employer when communicating about the new job opportunity at any time before or after his resignation.
Before the candidate resigns, the candidate should not discuss his resignation with co-workers, recruit co-workers to resign and join him at the new company, or directly solicit or do anything that could be perceived as soliciting customers.
The candidate should be careful not to use or disclose confidential information or trade secrets of the competitor during the recruitment process or after he begins work at his new job.
The candidate should return all proprietary materials to the former employer upon resignation, and should not bring to the new job or use any tangible materials or work product that he or she had access to or developed while working for the former employer.
Hiring from competitors (or taking a job with a competitor) is one area where you can unintentionally get into a bigger fight than you bargained for, so you should be very cautious before hiring or jumping ship to take a new job. Contact us to help you assess the legal risks and strategize your next steps!
*This blog provides general information for educational purposes only. It is not intended to constitute specific legal advice and does not create an attorney-client relationship.*