October 27, 2014  
 
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Raiding the Competition

 

Recruiting Employees from Competitors

Thinking about raiding the competition? When you start recruiting employees from your competitors, you may be playing with fire. Generally speaking, the courts protect the employee's right to freely seek employment in a competitive marketplace. But there are a few things to watch out for, and if you don't under them, you could easily get burned.

Your competitor's employee is just the person you've been looking for to head that new project. She's diligent, hard-working and already trained -- by your competitor.
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You've had preliminary talks with her, and she wants to work for your company. Even better, her whole department wants to come with her, eliminating the need to train a new staff.

Is this the perfect opportunity? Or does it put you at risk for liability to your competitor?

The employee may have obtained confidential information or trade secrets of the employer. Accepting such information about a competitor from a former employee could subject you to liability. You should also consider the consequences of your "raid" on your competitor. If raiding the company's employees cripples your competitor's ability to complete its contractual obligations, the company could make a claim for unfair practices and interference with contractual relationships.

The boundaries for solicitation of a competitor's employees are difficult to define. What should you do to protect yourself?

  • Check written agreements between the current employer and employee. Do they contain any confidentiality or non-competition agreements?
  • Do not follow the lure of insider information about either your competitor or its customers that may be offered by a prospective employee.
  • Do not assist or encourage an employee to solicit other employees to leave your competitor and come to work for you -- recruit them yourself. Otherwise you may be encouraging the employee to breach a fiduciary duty she may owe her employer.

If the shoe is on the other foot and YOUR company is being raided for its valuable employees, have in place employment non-competition and confidentiality agreements that can be enforced through a court-ordered injunction. Narrowly drafted non-competition agreements for short periods of time are best.

Have your employees execute a non-competition agreement that protects your company, and be sure it also states the company policy forbidding use of confidential information and trade secrets of a former employer. Your lawyer should review any such agreement to be sure it complies with state law.

Be wary when raiding your competitors.

Unless the raid is carefully orchestrated, you could end up paying your attorney and your competitor more than the cost of hiring and training new employees.

Article provided by Brenda H. Collier, Attorney and Counselor at Law. Contact Brenda at 512-482-9509.

 

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