A hiring employer should, among other things, implement institutional protections and obtain written representations at the outset of employment, which would help to reduce the risk of restrictive covenant litigation. In addition to reminding the employee of their obligations during the entire period they are subject and bound to the restrictive covenants, the hiring employer must persistently monitor and ensure that the employee has continued to comply.
To continue with this discussion, we now move on to “Considering Strategies for Pre-litigation Settlement,” which is another thing the hiring employer may have to consider to avoid, minimize, and/or mitigate the risk of litigation for hiring from a competitor.
Hiring from Competitors – Considering Strategies for Pre-litigation Settlement
Sometimes, even after providing the former employee with a cease and desist letter, disputes regarding restrictive covenant(s) tend to persist, and, eventually, the matter takes a turn toward litigation. This is the point at which the hiring employer should start factoring in pre-litigation settlement strategies. Generally, this step involves getting an overview of the nature and scope of the activities of the newly hired employee, which is usually achieved through a detailed written agreement between the hiring employer and the former employer.
Technically, this step should be taken to allow the newly hired employee to continue their duties of providing services to the hiring employer while still addressing the concerns of the former employer regarding the possibility of an unfair employer. Some of the terms that may be contained in pre-litigation settlements include, but are not limited to:
- An expedited arbitration or mediation process for handling any disputes under the settlement agreement to circumvent the expense and time of future court litigation.
- A mutual agreement or release by the former employer not to sue for any past-alleged transgressions by the hiring employer or the employee.
- If applicable, an exchange for a release of claims by the former employer in which an agreement is signed that the hiring employer will not hire the employee or will discharge them.
- An agreement that employee compliance would be enforced by putting monitoring parameters and/or ethical walls in place for a specific period.
- An agreement that the employee will not engage in or personally involve themselves, for a specific period, in servicing, pitching, and/or soliciting certain named clients of the former employer.
- An agreement that the employee will be assigned, for a specific period and by the hiring employer, to a non-competitive department or unit.
- An agreement that the employee’s start date will be delayed, at the order of the hiring employer, and for a specific period (preferably not longer than the original restricted period).
- A covenant that both the hiring employer and the employee will not involve themselves in the disclosure and/or use of any specific items considered confidential information and/or trade secrets by the former employer.
- An agreement involving the destruction or return of any materials and/or information in the employee’s possession but that belongs to the former employer.
In Part V of this series and our blog post titled “Hiring from Competitors – How to Counter Cease & Desist Letters,” we will hammer on key techniques and strategies a hiring employer may use when “Countering Cease & Desist Letters” and, eventually, avoid, minimize, and/or mitigate the risk of litigation for hiring from a competitor.
In the meantime, stay tuned for more legal guidance, training, and education in other series in progress. In the interim, if there are any questions or comments, please let us know at the Contact Us page!
Always rising above the bar,
Isaac T.,
Legal Writer & Author.