Hiring an Employee Who Has a Non-Compete: Proceed With Caution!

An employer has a “hot prospect” hire, perhaps coming through a placement agency, and all seems perfect until the prospect mentions something about a non-compete.  “It’s no problem, they never enforce it, and if they do it’s my issue to deal with.”  Employer beware!  The former employer may move to enforce and it may very well be your legal problem.

The prospective employer generally cannot rely upon an applicant’s assurances alone and can potentially be drawn into legal liability for hiring an employee under a non-compete pursuant to the tort of “tortious interference with contractual relations.”

Essentially, this tort provides that when a post-employment constraint exists, and the new employer has knowledge of its existence and procures a breach without justification, the new employer can be liable to the former employer for damages.  Such damages even may include the former employer’s attorneys’ fees in enforcing the non-compete.  The liability may extend to the procured breach of a non-solicitation, non-compete, or confidentiality agreement.

It is a somewhat complicated tort in its elements and often many defenses are possible, but tortious interference is very real and very important.  It requires careful independent legal analysis and consideration of the enforceability of a non-compete, non-solicitation, or confidentiality agreement as a critical component of a hiring decision.  Sometimes, independent legal analysis will result in a round of negotiations with the former employer or perhaps even the abandonment of a hire.  Legal counsel can provide protection to the employer in this difficult complication.

Takeaways:  When you know of a non-compete, stop the process and refrain from the natural inclination to rely upon the prospective hire’s representations and perspective – it could be wishful thinking and downplaying.  By knowing of the post-employment restraint, you have the “hot potato” and need a legal analysis of the next steps to take in analyzing and mitigating risk or avoiding the prospective liability of a tortious interference with contractual relations claim.

About Neal Buethe

Neal Buethe is Head of Briggs and Morgan’s Employment, Benefits and Labor Section. Neal represents professionals, executives, for-profit employers, and non-profit organizations in employment and related matters. He is general counsel to several non-profit corporations, including religious organizations. For Neal’s full bio, click here.

Posted on September 21, 2012, in Hiring, Non-Competition and Confidentiality. Bookmark the permalink. Leave a comment.

Comments are closed.