Noncompete agreements have become more popular in the last 10 years than ever before. The number of published court decisions over the agreements has risen more than 60 percent since 2002. Some even suspect this figure is a low estimate, as noncompete cases often settle out of court.
Any employer considering hiring a competitor’s employee should know about these noncompete clauses and other binding agreements, as they are legal contracts and can result in expensive litigation. A responsible employer who is looking to “poach” an employee should not only be aware of these contracts, but also inform the prospective employee of the limitations he or she may face.
What is a Noncompete Agreement?
Noncompete agreements restrict employees from taking customer data, business relationships, or trade secrets to competing employers within a select geographic area for a specific amount of time after the employee has left the company. Agreement terms vary between states, but most enforce these general guidelines.
At the beginning of employment, workers usually sign noncompete agreements. Although these contracts were previously only given to top executives, employers are now expanding these agreements to cover researchers, sales representatives and engineers. Some employees might not realize that they have signed an agreement, so the hiring company should confirm whether the worker is legally bound before taking action.
In 2010, nearly 80 percent of chief-executive employment contracts included noncompete agreements, according to a study conducted by researchers at the University of Michigan, New Mexico State University, and Vanderbilt University. That figure is up nearly seven percent since 2000, meaning that companies have gotten more protective of their employees – and the information they might share with other companies – during the recession.
In addition to noncompete agreements, some employers may require their workers to sign separate non-solicitation clauses or confidentiality agreements. These clauses restrict employees from recruiting coworkers to switch companies with them and disclosing information, respectively. If an employee agrees to one or more of these agreements (even without realizing it) and breaches his or her contract, then the employee, new employer, or both can face expensive litigation.
Warning Signs and Consequences of Hiring Away an Employee
An employer looking to hire away an employee must look for specific warning signs that could result in legal action. If the employee still works for your competitor, but is interested in switching companies, he or she cannot:
If the employee no longer works for your competitor, make sure that he or she has not:
Believe it or not, all of the above can result in legal action against your business or the employee, claiming trade secrets were misappropriated or breached. Noncompete agreement lawsuits can be expensive and time consuming for all parties involved. In court, an employer can even prohibit the employee looking to switch jobs from working at the prospective company, if it is found that he or she violated their noncompete agreement.
When considering hiring a competitor’s employee, remember these warning signs and the ramifications of a breach of contract. It can also help to avoid litigation by knowing an employee’s rights; an employee has the right to look at his or her employment files before leaving a job, and therefore can see whether he or she is bound by any sort of confidentiality agreement. In addition, all noncompete agreements must have an expiration date, otherwise they will not hold up in court. Lastly, practice discretion when contacting the competitor’s employee, as emails and written correspondence can be held as evidence of breach of contract in court.
Author Bio : At Marlin & Saltzman, LLP , Louis M. Marlin focuses on class action lawsuits to help protect the rights of individuals throughout California and the United States. With over 42 years of litigation experience, Mr. Marlin is considered one of the leading class action attorneys in California, and has been named as a “Super Lawyer” by Los Angeles Magazine many times.
Originally published on LawyerCentral by Louis Marlin on October 29, 2013 Read the original (Internet Archive).