Hiring from Competitors - AvNetwork.com
The Ins and Outs of Hiring Away From Competitors

Chances are, you’ve got competitors. And amongst them, it’s likely that they’ve got a few great employees that you’d love to have come and work for you. In an economy based on free enterprise, companies hire away—or sometimes poach—from the competition all the time. But there’s a few things to think about if you want to do this while minimizing the potential legal costs involved.

In tech, non-competes are common, and the first question employers should ask their star candidate is whether or not they’ve signed one. Erik Winton, a principal in the Boston, MA-based office of Jackson Lewis P.C., and co-leader of the firm's Non-Competes and Protection Against Unfair Competition practice group, takes this one step further and counsels his clients to ask what agreements the individual has signed, period. “Those agreements can run the gamut from a non-disclosure agreement—meaning they’re obligated to keep trade and confidential information secret—to a full-on non-compete that says they can’t work for a competing company within some geographical area for a specific period of time, like six months, or a year, or two years,” he explained. There are also non-solicitation provisions to look out for, which may state that the individual cannot solicit or service customers that they worked with at their previous employer, nor can they approach former colleagues about coming and working with them in their new organization.

The degree to which these agreements are enforceable depends on how well they’re written—something that the hiring company’s legal counsel can determine. If the contract is solid and you really want that candidate to come and work for you anyway, there may be a way to negotiate with their former employer. “We’ve helped clients hire an employee [away from a competitor] but give financial compensation to the company from who they’re hiring away so that they can preemptively get rid of any potential litigation issues,” explained Brett Trembly, attorney and managing partner at Trembly Law Firm in Miami, FL. This can be tricky, however, because there are no guarantees that the competitor will cooperate. “The amount of that buyout heavily depends on the company, and usually when you broach that subject with the potential employee’s current company, you have basically irreparably damaged the relationship between that employee and their employer. You have to be certain and serious that this thing is going to move forward.”

Cliff Ennico, author of Small Business Survival Guide

Cliff Ennico

Cliff Ennico, a contracts lawyer based in Fairfield, CT, and author of Small Business Survival Guide, has come across cases where the hiring company has purposely chosen not to ask the candidate whether they have signed any agreements because they want to remain ignorant. “They don’t want to know about the restriction, because once they know about the restriction and they proceed with this person, then they’re liable for interference with contract,” he said. “I cannot, obviously, counsel that course of action.”

Another sensitive issue centers on trade secrets. While it may be tempting, Winton warns employers that even in the absence of a non-disclosure agreement, your star candidate is not permitted to share trade secrets and confidential information pertaining to their previous employer with you. “For the most part, confidential information and trade secrets is information [like] margins, and information about products and services that [companies] don’t reveal to customers and that [they] take steps to protect internally,” he said. “[They are] things that you wouldn’t share with your competitor because it would allow them to have a competitive advantage over you.” In other words, it’s a bad idea to urge the candidate to share things like customer lists. “You want to make sure they come over cleanly.”

Brett Trembly, Trembly Law Firm

Brett Trembly

One non-legal nuance that employers should get a read on is why, exactly, this person is interested in leaving their current job for the one you’re offering. “If they’re coming to work for you because you slightly outbid someone, then how is that employee going to work out when the next company comes along and gives them a slightly higher offer and then they want to leave you?” Trembly illustrated. You can preach loyalty, but seeing as you “stole” them from someone else, that argument won’t hold up too well. “It’s kind of like the analogy of stealing someone’s girlfriend or boyfriend: when the shoe’s on the other foot, it makes you feel pretty insecure.”

In most situations, the hiring company has no way of verifying whether or not the job candidate has signed any restrictive agreements with their current employer—if they say they haven’t, you’re forced to take their word for it. To add a layer of protection to the transaction, Ennico advises hiring companies to have tight employment contracts themselves. “If you really feel that you must hire this person—if this person is going to be a mission-changer for you—make it very clear in the employment agreement that the employee is at will. That means that he can be terminated at any time, for any reason or no reason,” he said. This way, if their former employer threatens to take action in court, you have the option of letting that employee go instead of defending your case in front of a judge. He says that the contract can go one step further and stipulate that if you discover that the employee has signed a restrictive agreement with their former employer, you have the right to fire them immediately. “You want to be in a position to just get rid of the employee and dodge the problem. You do not want a lawsuit.”


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