3 Ways to Avoid Litigation When Hiring an Employee from a Competitor
When hiring an employee from a competitor, the last thing a company wants is to be embroiled in litigation accusing it of hiring the employee to steal that competitor’s customers or trade secrets. As a result, the process of “on-boarding” a new employee — taking steps to make sure that the employee is properly brought aboard to minimize risk of litigation from the former employer — needs to be part of every company’s hiring procedure.
The process of on-boarding can be a challenging and delicate one. There are potential complications for the unwary, as the interests of the new employee and the new employer may not always be aligned, and the blurring of the lines between personal and professional electronic devices, as well as other workplace technologies, may lead to the discovery of documents that should have stayed with the former employer.
Despite these potential complexities, there are three steps that every employer can take to minimize that risk.
1. Ask for and review all employment agreements
This the first and most important step because without it, a new employer is almost certainly flying blind in the hiring process. Courts expect a new employer to review the agreement to address any potential restrictions and to take steps to protect the legitimate business interests of the former employer. You can’t protect those interests if you don’t know what the former employer and new employee agreed to during their relationship.
2. Leave the former employer’s documents behind.
A new employer should prohibit the prospective employee from using or bringing his previous employer’s confidential information trade secrets with him/her. This means copies of all confidential customer lists, marketing and business strategies and other potentially proprietary information of the previous employer should be returned to the former employer before the employee transitions.
Of course, it is not that simple in the digital world in which we live. We all work at home and copies of a former employer’s documents may make their way onto personal devices or end up in a home office desk drawer. Therefore, an employer should also remind a new employee to double-check personal devices and his/her desk and files at home.
An employer needs to reinforce the consequences that might ensue (suspension, termination, etc.) should the employee bring or attempt to use his or her employer’s confidential information or trade secrets. All of this should be in writing and preferably a term in the new employee’s agreement. This agreement will not only protect the employer but will also protect the new employee in any subsequent litigation because it will be proof of the steps taken to protect any trade secrets of the former employer.
3. Protect the legitimate business interests of the former employer
Having taken the steps to avoid or minimize risk during the hiring process, an employer still has to properly manage the employee once he/she joins the company, especially if that employee has a non-compete or non-solicitation agreement with his/her former employer.
In legal terms, that employer needs to protect the legitimate business interests of the former employer, which typically take the form of confidential information or customer relationships. While the steps that an employer may need to take can vary from employee to employee, an employer should take affirmative steps to ensure any confidential information or trade secrets of a former employer are protected and not used.
If the employee has an enforceable non-compete or non-solicitation agreement, the company may need to instruct the new employee not to solicit his former customers for the remainder of the term of that agreement.
At the end of the day, an employer will increase its odds of avoiding litigation or minimizing its risk in that litigation by taking affirmative steps to prevent the use or disclosure of the competitor’s trade secrets and minimize intrusion into legitimately protected customer relationships.
These steps may be particularly effective in heading off a lawsuit because they can put the former employer on notice that there is no basis for litigation.