Five Tips For Safely Hiring Employees From The Competition And Avoiding A Lawsuit


Savvy companies are always on the lookout for talented, experienced employees. Usually, the best candidates are already working for a competitor; after all, they know the business and their learning curve is short. While adding a highly qualified new member to your team can boost the bottom line, it can become a legal nightmare if you are careless in the hiring process. Here are five tips worth observing in the hiring process:

1. Avoid The "Ignorance Is Bliss" Approach. Some companies think that if they don't ask about a candidate's post-employment obligations, they can never be held liable if the employee breaches them. Wrong. Ignorance creates unknown exposure to the hiring company, since many courts will examine what a reasonable employer should have known. Ask a candidate before making any offer whether there is any agreement with post-employment terms. If the answer is yes, get a copy and have your lawyer review it.

2. Set Expectations Of Compliance. Hiring companies often assume that the employee's agreement is completely unenforceable or can otherwise be ignored. This is a mistake on two levels. From a legal standpoint, while a court may sometimes strike down an agreement in its entirety, more often than not at least some portion of it will be upheld. From a practical standpoint, sending a message within your own company, even implicitly, that these agreements can be ignored undercuts the culture of protecting your own confidential information and business interests - especially if your own company uses similar agreements.

3. Avoid Circumstances That Could Lead To Disclosure Of Trade Secrets. Of all the different types of post-employment obligations, courts are most likely to enforce those that prohibit the disclosure of the previous employer's confidential information and trade secrets. You should take reasonable steps to prevent an overlap of responsibility between the employee's old and new positions that might result in the disclosure of such information. You should document your efforts.

4. Maximize Compliance Opportunities. In the case of non-solicitation and non-competition provisions, you should consider how the new employee can comply with them, at least to the extent they are reasonable. Depending on the circumstances, consider time, geographic, customer-based or function-based limitations, or some combination. While this always involves a prediction of sorts, if there is a lawsuit your company will be viewed more favorably if you tried in good faith to accommodate the former employer's interests than if you did nothing at all.

5. Convey Your Expectations To The New Employee In Writing. Once you have determined your approach, communicate your expectations to the employee in writing. At a minimum, instruct the new hire not to bring or use any materials that might contain confidential information or trade secrets. Depending on what other restrictions you have determined are appropriate, you should spell these out in writing as well. Make clear that any failure by the new employee to adhere to these standards may be grounds for termination.