Make Sure New Employees Do Not Have Old Non-Compete Agreements that Can Sink Your Business
Thomas W. Hartmann
The Hartmann Law Firm LLC
TheHartmannLawFirm.com; [email protected]; 908 769 6888
New employers should be careful in hiring laterals or people who claim to be able to bring a book of business, prior customers or other employees. While such people can boost your business immediately, they can also mire you in litigation if they have a non-compete agreement or have agreed to restrictive covenants on future employment.
Ask your potential new employee if she signed a non-compete or a restrictive covenant as a condition of the employment she is leaving. If the potential employee has signed such an agreement, examine it carefully. If the potential employee cannot remember, that is a warning sign.
Nail this down before proceeding. Also, you should know if your industry typically uses non-compete agreements. Businesses that rely heavily on sales staff to develop and maintain accounts often have non-competes or restrictive covenants as an industry standard.
Review the non-compete or restrictive covenant carefully. It usually has restrictions regarding contacting or soliciting prior customers or employees for a duration, often one to two years, within a geographic area near the former employer's operation.
Non-compete agreements and restrictive covenants are often convoluted. So, take them apart very carefully and seek counsel if you believe it appropriate.
Why? After all, the non-compete or restrictive covenant is directed to the employee, not you, the potential, new employer. But, if you “assist” in the violation of the non-compete or restrictive covenant by hiring the new person, who then violates the non-compete, you are subject to being sued.
The most common claims are called tortious interference or interference with a third party contract – but that is just lawyer language to say that you have helped someone violate the contract the employee had with the former employer, and you can be liable.
In fact, the risk to you can be greater than to the employee as you may have deeper pockets.
The Hartmann Law Firm LLC can assist in these compliance matters to insure your business and your assets are protected. Beyond this, we can help guide businesses through issues ahead of litigation or aggressively advocate in litigation and business disputes should the need arise.