BFV Perspectives, Corporate Matters, Noncompete & Trade Secrets, | May 01, 2018

Tips When Hiring from a Competitor

Many times, the most qualified and experienced candidates for positions you are seeking to fill in your business are those who are currently working for your competitors.  If you are not careful, the hiring of an employee from a competitor can be fraught with peril.

While much of the decision as to whether to hire someone from a competitor may be driven by the types of restrictive covenants the person has signed (non-compete, customer non-solicit, employee non-recruitment, non-disclosure/confidentiality), there are certain steps you can take to minimize the risk of any litigation or liability regardless of whether of any restrictive covenants are involved. Here are a few of those steps:

  1. During the interview process, be sure to advise candidates that you expect them to comply with their legal and contractual obligations before and after the end of their employment with their current employer. This should include ensuring that employees comply with any fiduciary duty or duty of loyalty they may have to their current employer. The parameters and scope of this duty are state specific, so you need to be sure to know the law of the state or states involved.   
  1. If the candidate is customer or client facing in his or her current position, you should be sure that you and the candidate are on the same page as it relates to notifying customer or clients of the transition and/or soliciting clients once the employee has joined your company. How this is handled will be dictated by the nature of the restrictive covenants, if any, the candidate has signed and the applicable state law regarding fiduciary duty and duty of loyalty.
  1. During the interview process, candidates should also be reminded of their obligation not to take any information that constitutes confidential information or trade secrets of their current employer.
  1. In the hiring process, be sure employees agree, in writing, that during their employment with you, they will not use or disclose any confidential information or trade secrets of their former employer.
  2. In the hiring process, you will also want to take affirmative steps to ensure no information that could conceivably constitute confidential information or trade secrets of the former employer are retained by your new  employee or brought to you by the employee. Once confidential information or trade secrets of a competitor make their way onto your computers or network, it can be very costly to identify, locate and remove the information to remediate the problem.

Setting these expectations early on in the recruitment process can significantly reduce the chances of any issues arising after the person becomes employed by you.  Likewise, in the unfortunate event of a lawsuit by the former employer, taking these steps can significantly reduce any potential exposure you may have from the hiring of an employee from a competitor.  Failure to follow these protocols can result in significant defense costs and potential liability for your company and the new employee for breach of contract, breach of fiduciary duty or duty of loyalty, tortious interference, misappropriation of trade secrets, computer fraud or theft and many other related tort and statutory claims.

If you find yourself in any of the above situations, please let us know if we can help. 

BFV Perspectives, Corporate Matters, Noncompete & Trade Secrets, | May 01, 2018
Benjamin I. Fink
Benjamin I. Fink

Benjamin Fink is known for his work in noncompete, trade secret and competition-related disputes. A shareholder at Berman Fink Van Horn, Ben concentrates his practice in business and employment litigation.