“Leaving the Hiring Employer an Out” is one of the steps that may be taken to minimize and mitigate the risk of litigation for hiring from a competitor. Regarding this concept, a hiring employer may have to terminate the newly hired employee as a way of extricating itself from or avoiding litigation arising from a breach of restrictive covenants. Unfortunately, because of contractual restrictions, it is not always possible to terminate the newly hired employee immediately, especially when it comes to high-level executives, which implies that despite best efforts from the hiring employer, an employee who is found to have violated restrictive covenants with a former employer or engaged in wrongdoing should be terminated.
To continue with this discussion, we now move on to “Ensuring Continued Compliance” as the next step that may be taken to minimize and mitigate the risk of litigation for hiring from a competitor.
Hiring from Competitors – Ensuring Continued Compliance
A hiring employer should, among other things discussed in other blogs under this series, implement institutional protections and obtain written representations at the outset of employment, which would help to reduce the risk of restrictive covenant litigation. However, this is not enough because the new employee may fail to comply. This means that 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.
Furthermore, in addition to checking and investigating whether the employee is involved in areas for which they are not authorized and/or using confidential information, the hiring employer should periodically keep on reviewing whether the employee is observing all protocols as required. Additionally, to ensure that one is not exposed to claims related to the theft and misappropriation of the competitor’s trade secrets, the hiring employer should also conduct periodic audits of the employee’s work product and communications, especially in cases where valuable, proprietary, and/or sensitive types of competitive information, such as patents, secret source codes, and production formulas are involved.
With such periodic reviews, investigations, and assessments, the hiring employer may be able to ensure continued compliance by the employee and, subsequently, minimize and mitigate the risk of litigation for hiring from a competitor.
In Part IV of this series and our blog post titled “Hiring from Competitors – Considering Pre-litigation Settlement,” we will move the discussion forward by hammering on “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.
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.