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Hiring A Competitor’s Employee

On Behalf of | Sep 23, 2014 | Employment Law

Experience and contacts in an industry often makes job candidate more value. Since a job candidate usually get her experience and contacts working for competitors, the company considering hiring said candidate needs to consider restrictions on that candidate’s ability to do the job because of her obligations to her prior employer. First, the company should inquire as to whether the candidate has any type of agreement that would restrict her work for the company, such as an agreement with requirements of: confidentiality and non-disclosure; non-solicitation of customers or prospective customers; or a general non-compete. If the candidate has such an agreement, before you as their potential new employer makes a job offer you will want to see the actual agreement. If that candidate is valuable enough, you should have that agreement reviewed by your company’s employment attorney as to its potential enforceability and interpretation before a court.

Under New Hampshire law, non-competition agreements in employment situations are narrowly construed to protect legitimate business interests of the employer which include protecting confidential information and the good will of the prior employer. It is uncommon for courts to enforce a non-compete restricting work in a broad industry yet in a particular narrow industry it is possible the court may deem a non-competition with a narrow geographical area and timeframe to be enforceable. For example, a non-competition agreement for an auto mechanic prohibiting him from working for a year within 30 miles of his employer’s place of business may be deemed unreasonable by the judge, yet a similar contract provision as to a salesperson of specialized hardware and software for a physician’s office may be deemed by that same judge to be reasonable and enforceable. Agreements that prevent an employee who had direct and meaningful contact with customers or potential customers from soliciting within a year from leaving that employer, those customers or prospective customers are likely to be considered by the courts to be reasonable and enforceable.

As the potential new employer you should seriously consider the impact such a restriction may have on the candidate doing the job you plan to pay her to do. Further, you should also consider the possibility that the prior employer may sue not only the employee for breach of contract, but may sue your company as the new employer for wrongful or tortious interference with a contractual relationship claiming that you knew of the contract and that you assisted the employee in violating it. Some employee candidates may be worth that battle in court, yet others are not.

If a candidate does not have any such contractual restrictions, then generally she is not prohibited from competing in the industry, working with you in competition with their former employer, or soliciting former customers. However, if she does so using customer lists she downloaded from her prior employer or plans to use other confidential information that you would not generally be privy to then she and your company face a legal claim of a violation of the Uniform Trade Secret Act which prohibits the misappropriation of confidential and proprietary information. Simply put, employees still have confidentiality obligations to their former employers even if they do not have a contract that states so and you as the new employer need to be knowledgeable of that obligation.

Furthermore, if a job candidate explains to you that she has confidential information from her current employer that she can use for your company’s benefit as a new employee, you should consider the likelihood that she would do the same to you later thereby stealing your confidential information to enhance her prospects of obtaining a new job with another competitor or perhaps starting her own business. As an employer you want honest and ethical employees and anyone who is willing to offer up the confidential information from a current or former employer is likely to do that to you as well. Also using confidential information she provided from your competitor could diminish your company’s reputation in the industry among vendors and potential customers.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].