Here at the Law Office of Vincent Miletti, Esq. and the home of the #UnusuallyMotivated movement, we take pride as a resilient and dependable legal services firm, providing such services in both a traditional and online, web-based environment. With mastered specialization in areas such as Employment and Labor Law, Intellectual Property (IP) (trademark, copyright, patent), Entertainment Law, and e-Commerce (Supply Chain, Distribution, Fulfillment, Standard Legal & Regulatory), we provide a range of legal services including, but not limited to traditional legal representation (litigation, mediation, arbitration, opinion letters, and advisory), non-litigated business legal representation and legal counsel, and unique, online legal services such as smart forms, mobile training, legal marketing, and development.

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As the authoritative force in Employment Law, it only seemed right to introduce one of the many upcoming series in which we introduce a variety of topics that looks to educate and deliver in a manner that only Miletti Law® can. To that end, this blog is Part IX of our series on “Best Practices for Reducing Litigation Risks when Hiring from Competitors.” In Part VIII, we hammered on how an employer may “Ensure the Employee Left former Employer without Incident” in an attempt to minimize and mitigate the risk of litigation for hiring from a competitor. Regarding this practice, we mentioned that an employee might sometimes accept an employment offer from a hiring employee while still engaged with the soon-to-be former employer. During such a hiring process, the hiring employer should address two critical issues and instruct the soon-to-be employee to (1) ensure all property belonging to the soon-to-be former employer has been returned and (2) ensure that proper conduct has been observed and notice has been provided during the notice period.

As a continuation of this series, we now move our discussion forward by hammering on the importance of “Obtaining Written Protections from New Hires,” which is another thing the hiring employer may have to consider in an attempt to avoid, minimize, and/or mitigate the risk of litigation for hiring from a competitor.

Hiring from Competitors – Obtain Written Protections from New Hires

Employers who wish to hire from competitors should, as a best practice for avoiding, minimizing, and/or mitigating the risk of litigation for hiring from the competitor, enquire about post-employment restrictions and obtain written representations of the same. Accordingly, the hiring employer should obtain the following, among other key written statements about an employee’s post-employment restrictions to confidential information and covenants. Two of these key statements are discussed below:

1. Obtaining an agreement that the hire is subject to potentially valid restrictive covenants

The hiring employer should always demonstrate that no existing post-employment restrictions conflict with a new hire’s employment. In this regard, the hiring employer should specify in writing – whether in an employment contract, letter of offer, employee handbook, or other document(s) used in the hiring process – the specific scope and nature of the hires new position, particularly if the individual is being hired in a capacity where potentially valid restrictions to which the person is subject to are not implicated. For instance, suppose that a restrictive agreement is applicable to only a given client base, business segment, or geographic region. If that is the case, then it should be specified upfront and in writing that the new hire is either (1) being employed in a non-competitive capacity, (2) allowed to service only certain kinds of prospective clients or clients, or (3) required to undertake responsibilities in a different business segment or geographic region.

2. Obtaining an agreement affirming non-disclosure and/or non-use of former employer’s confidential information

Irrespective of whether a hire is subject to written post-employment restrictions, the hiring employer should require the individual to agree, in writing, that they would not use or disclose, while in the new job, any confidential information and/or trade secrets belonging to the former employer. Essentially, this written agreement serves two crucial things. Firstly, it would assist the hiring employer in showing that it is not responsible for an employee’s action(s) that contravened both its instructions and the written representations and that it was acting in good faith. Secondly, it would notify the hire that no disclosure or use of the former employer’s trade secrets or confidential information would be allowed, tolerated, or expected.

3. Obtain warranties from candidates who claim they are not subject to restrictive covenants

In this case, the hiring employer should require the candidate to sign a set of warranties whenever one claims they are not subject to any written post-employment covenants/agreements. A warranty would act as an affirmation in which the employer detaches from all responsibilities and liabilities that would arise from restrictive covenant litigation brought by a former employer. Additionally, by showing that the hiring was done without any knowledge of existing post-employment restrictions and in good faith, such warranties may help to mitigate the risk of being sued by the former employer. Importantly, should the former employer decide to proceed to court, such warranties can serve as a defense to tortious interference claims for the hiring employer because they would help to establish that the latter did not have any knowledge that post-employment restrictions existing between the former and the new hire.

In Part X of this series and our blog titled “Hiring from Competitors – Seeking Full Disclosure from Candidates,” we will hammer on the importance of seeking full disclosure from employment candidates, which comprises another crucial step a hiring employer should 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.