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. Accordingly, there’s a list of terms that may be contained in pre-litigation settlements, which you can easily get by reading our blog post.
To continue with this discussion, we now move on to “Countering Cease & Desist Letters,” 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 – How to Counter Cease & Desist Letters
1. Determining the reason(s) and motivation(s) why a former employer sent a cease and desist letter
Cease and desist letters are usually sent by former employers. Therefore, even before responding to one, it is crucial for the hiring employer to understand the reason(s) and motivation(s) behind a cease and desist letter. Technically, it is not easy to determine the reason(s) and motivation(s) behind which a former employer sends a cease and desist letter. However, we have come up with three possible reason(s) and motivation(s) why such a letter was sent, which a hiring employer may give priority even for responding to any. These possibilities include, but are not limited to:
- Following their intention to file a lawsuit, the former employer may send a cease and desist letter to create a record that could be used in court.
- The former employer prefers to resolve the matter without litigation and obtain compliance assurances, but if forced to, they could file a lawsuit-and-
- The former employer utilizes litigation as a threat in an attempt to make the hiring employer and former employee cease or desist from any violations, but does have no intention of litigating.
Accordingly, the hiring employer should take the initiative to respond to any of such letters, even if it does not know the former employer’s motive, because failure to do so could make matters worse for every party involved.
2. Responding to cease and desist letters
Based on the circumstances and facts of a particular case, a hiring employer within the life sciences industry may adopt several strategies in response to cease and desist letters. For instance, the employer should factor in whether intentional misrepresentations were made by the new hire, where the post-employment restrictions that were not disclosed by this new hire have been identified in the cease and desist letter. If that is the case, then the hiring employer may send a response to the former employer indicating that they will or have to discontinue the new hire’s employment, effective immediately or after a reasonable period.
However, a hiring employer may opt to proceed with engaging an employee despite being aware that the employee is subject to post-employment restrictions because (1) the hiring employer has taken measures to make sure that the employee does not violate the restrictions, (2) has established that the restrictions were partially or wholly unenforceable, or (3) both. If that is the case, then the hiring employer should, as a best practice, respond to the cease and desist letter by indicating and providing:
- Acknowledgment of the concerns of the former employer
- Its intention is to aggressively defend any claims that might be brought by the former employer
- Reasons why it believes that the restrictions are partially or wholly enforceable
- Facts to counter any allegations of improper conduct that the former employer may make
- If appropriate, a summary or outline of precautionary measures taken by the hiring employer to ensure that the new hire has complied with their post-employment obligations and that they do not violate the post-employment restrictions
- If applicable, a statement that during the restricted period, the new hire will be disengaged from soliciting clients of the former employer and will not engage themselves in competitive activities
- A statement that no unacceptable use or disclosure of the former employer’s confidential information or trade secrets has taken place-and-
- A statement that the hiring employer does not intend to misappropriate or accept the benefits that come with the use and disclosure of the former employer’s confidential information or trade secrets.
Hiring employers must be aware that, at times, they may receive cease and desist letters providing examples and facts of misconduct, such as actual misappropriation of specific trade secrets and confidential information that the hiring employer was not aware of and was committed by the employee immediately before they left the former employer. In such a case, a hiring employer should effectively send a response indicating that an investigation into the allegations would start immediately and, if the former employer’s allegations are corroborated, then it would take the necessary actions and ameliorative measures against the new hire and in accordance with the law and advisory of its legal counsel. Accordingly, the former employer should be notified if the hiring employer finds no corroborating evidence.
In Part VI of this series and our blog post titled “Hiring from Competitors – Potential Claims from Former Employers,” we will provide you with a list of potential claims that a former employer may make and that a hiring employer should 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.