The livelihood of every successful company lies in the abilities of its employees.  Many companies hire employees from competitors.  While it is perfectly legal to recruit and hire a competitor’s employee, doing so can lead to legal issues with competitors.  Before hiring a competitor’s employee, there are several things you should be aware of to protect your company and avoid litigation. 

All employees have certain common law obligations to their current employers. For example, an employee cannot begin diverting customers from his or her current employer to his or her new employer. Moreover, even if an employee resigns, the employee is still required to maintain the confidentiality of the former employer’s trade secrets.

In addition, many employers require employees to sign contractual non-disclosure, intellectual property assignment, non-solicitation and non-competition agreements.  These agreements may expand the scope of the employee’s confidentiality obligations, prohibit an employee from soliciting the former employer’s employees and clients and restrict the employee’s ability to engage in competitive employment.

Employers should consider requiring candidates to disclose any restrictive agreements in advance, so that the new employer can review them with its counsel before making a hiring decision. If hiring the candidate will violate the terms of the agreement, the employer and its counsel should assess the extent to which the restrictions found in the agreement are “reasonable” (i.e., designed to protect the legitimate interests of the former employer) and thus enforceable. If the agreement is “overbroad” (e.g., a blanket restriction with no geographic or scope of duties limitation) the employer and its counsel may assess whether the candidate is worth the cost and risk associated with litigating the scope of the agreement with the competitor.

Once the employee has joined the new employer, the new employer should consider limiting the employee’s involvement in the recruitment of his or her former employer’s employees and customers. At a minimum, the new employer must ensure any such recruitment complies with the employee’s continuing common law obligation to respect the competitor’s trade secrets, as well as any contractual obligations the employee may have.

Although it is impossible to avoid the risk of litigation completely, a transparent approach that acknowledges and accounts for an employee’s obligations to his or her former employer can minimize the risk that the hiring results in a lawsuit and can minimize the new employer’s exposure in the event of such litigation.

Jason Boulette is Board Certified in Labor and Employment law by the Texas Board of Legal Specialization (TBLS). TBLS certifies attorneys in 20 specialty areas of law and is the only certification organization authorized by the Supreme Court of Texas. Board Certified attorneys have substantial, relevant experience in a select field of law as well as demonstrated, and tested, special competence in that area of law. They are the only attorneys authorized by the State Bar of Texas to publicly represent themselves as specialists in a select area of law. 

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