Hiring from a competitor is not always “employee raiding,” but every employer should take necessary precautions before making such a move. Notably, employers are responsible for taking the necessary steps and considering a myriad of factors in an attempt to minimize the risk of litigation and be adequately set to defend any legal action that might be brought against them for hiring from their competitors. However, it is also critical to understand that when hiring from competitors, it is impossible to eliminate litigation risks entirely.
Having introduced the series in Part I, we now dive right into “Leaving the Hiring Employer an Out,” as one of the steps that may be taken to minimize and mitigate the risk of litigation for hiring from a competitor.
Hiring from Competitors – Leave the Hiring Employer an Out
Under many circumstances, the 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.
This 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. However, the hiring employer should make sure they have addressed any existing contracts with such an employee accordingly. For instance, in order to be able to do this, the employer should create and enter into employment contracts with newly hired employees stating that one should be immediately terminated under certain circumstances.
For example, if the employee is found to have exposed the new employer to liability after having violated their post-employment obligations (breached restrictive covenants or taken part in wrongdoings). Additionally, such an employee should be immediately terminated for misrepresenting their existing commitments to the hiring employer at the time of hire. Including such provisions in a contract with a newly hired employee plays a critical role in helping the hiring employer negate the inevitable decision of being required to seek defense against the employee for wrongfully terminating them or against a competitor for taking part in breaching a restrictive covenant between the former employer and the newly hired employee.
In Part II of this series, we will stick to the same lane by hammering on “Hiring from Competitors – Ensure Continued Compliance,” which is the second step a hiring employer may have to take 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.