Minimizing Risks of Litigation When Recruiting From A Competitor

28/10/2022 8:08 AM

Every employer wants the best talent working for them. Unfortunately, the best talent is almost always taken, and the only way of getting them would be to have them leave their current employer for you.

However, there are situations where it could result in legal challenges, especially when the competitor's trade secrets are at risk or the hiring interferes with the employee's contract with their current employer. The good news is that you can take several steps to minimize the chances of litigation under such circumstances, and here are three of them. 


 


1. Start With Identifying Potential Claims 


Tortious Interference with a Contract


There are situations where employers enter into non-compete or non-solicitation agreements with their employees. These agreements can prohibit the employee from working with a competitor or starting a similar business within a specified time of leaving their employer.


 


If you take in such an employee, their former employer can file a tortious interference claim with you, but they have to prove that you know or should have known that such agreements existed between you and the employee. If they are successful, you could be liable for damages resulting from your actions, including punitive damages.


 


Aiding and Abetting Breach of Fiduciary Duty 


All employees must work for their employer's best interests, whether or not there are post-employment restriction agreements. If, when seeking to hire an employee, they engage in an act that violates their fiduciary duty, their former employer can sue you for aiding and abetting their actions of violating their judicial duty. 


 


Actions that constitute a breach of fiduciary duty include when an employee solicits new clients for their prospective employer while still working for the employer.


 


Misappropriation of Trade Secrets


If a high-ranking employee leaves an employer, they take with them tons of their former employer's trade secrets and confidential or proprietary information. If the employee misappropriated that information, their new employer risks being accused as an abettor under the inevitable disclosure theory. 


 


If the former employer decides to sue, the first step they will take will be to send a cease and desist notice. This provides notice of potential legal actions where you will have specified time to reply, agreeing to abide by the terms of the notice or otherwise. 


 


If you do not reply within the specified time, the aggrieved party will proceed to file a lawsuit for misappropriation of trade secrets. The best approach in such circumstances is to work with a lawyer.


 


2. Ask to Review Your New Employee's Employment Agreements


Before taking in a new hire from your competition, it's important to review their agreements and contracts with their former employer first. Some employees may not understand the implications of violating their terms of employment and thus may not be forthcoming with all the information needed. 


 


So having them provide paperwork for their employment terms with the employer they are leaving can help you understand the nature of their agreement. That way, it will be easy for you to avoid engaging in any actions that could give grounds for a lawsuit. If the risks are too high, you should reconsider hiring or wait until the employee's circumstances change.


 


3. Have Them Leave Their Former Employer's Sensitive Information Behind


If you decide to take in an employee from a competitor, it's important to safeguard the former employer's confidential information. The best way to do this is by making the employee leave their former employer's information as a term of employment. 


 


Also, it is important to have a policy that prohibits your new employees from violating any of the terms agreed upon between them and their former employer. These policies can include disallowing them to solicit clients they had acquired on behalf of the former employer for the period specified on their non-compete agreements.

Editorial Team
Consultant
This article was written by Editorial a Consultant at Industrial Psychology Consultants (Pvt) Ltd

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