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Red Flags When Recruiting a Competitor’s Employee: Spotting Issues Before a Demand Letter

Winning in restrictive covenant litigation is one thing, but most employers would prefer to avoid it if possible, or at least make decisions with “eyes wide open” as to the litigation risks of a potential hire. Below are some “red flags” that may motivate a dispute.

The Former Employer’s Sensitivities, Generally and Specific to the Candidate:

  • What are the resources and litigation appetite of the former employer? Non-compete litigation is expensive and comes with significant risk. Does the former employer have a history of filing such litigation? Is the former employer aggressive in enforcing restrictive covenants, and under what circumstances?

  • How sensitive is the former employer likely to be about the loss of the candidate? How senior or junior is the candidate? Is he/she a practice leader or individual contributor? Does the candidate hold key client relationships, trade secrets, or other intellectual property (“IP”) knowledge that may motivate litigation?

  • Did the candidate take any IP or other property of the former employer? A belief the candidate stole IP casts the candidate as a bad actor and opens up statutory claims for theft of trade secrets. The new employer should expressly remind candidates to take and bring nothing from their former employer.

  • How vulnerable are the restrictions in the candidate’s agreement if an enforcement action is filed? The restrictions may be overly broad and out of step with recent case law in the applicable jurisdiction. The greater the vulnerability, the less likely the former employer will bring litigation.

The Former Employer’s Sensitivities to the Candidate’s New Employment:

  • Is the new employer a direct or indirect competitor of the former employer? The more direct the competition, the more likely the former employer is to be motivated to take action. It may be possible to avoid a dispute by providing assurances the candidate will not, for the restricted period, solicit the customers or employees of the former employer.

  • Is the candidate being hired in substantially the same role as at the former employer? Hiring into a different role, at least for the duration of the restriction, may avoid a dispute. Former employers have limited ability to monitor the candidate’s activities, but a representation may be enough.

  • Is the candidate being hired to work/compete in the same geographic area or market space? A candidate moving to a competitor in the same city or market may lead to a dispute. If this can be avoided for the duration of a restriction, there is a greater likelihood of resolution without litigation.

The Parties’ History:

  • Is the former employer’s perception likely to be that the new employer is targeting its employees? Is the candidate the first or just the most recent individual hired from the former employer? Did the new employer recruit the candidate, or did the candidate make the first contact about employment? One or two hires may go unchallenged, but additional hires, particularly over a short period, increase the risk of litigation.

  • Has the former employer previously hired employees of the new employer, and how did the new employer react? If the new employer’s previous reaction was to file suit to prevent an employee from working for the former employer, one shouldn’t expect the former employer to turn the other cheek when the situation is reversed.

  • Are there other indications of bad blood between the parties? Have there been other disputes between the new employer and former employer that led to litigation? Has the candidate or new employer disparaged the former employer in the marketplace? The more bad blood, the greater the risk of litigation.

©2019 Epstein Becker & Green, P.C. All rights reserved.

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About this Author

Mike Ferrell Employment Lawyer Epstein Becker Green
Associate

MICHAEL (“MIKE”) S. FERRELL is a Member of the Firm in the Employment, Labor & Workforce Management practice, in the Chicago office of Epstein Becker Green. Mr. Ferrell provides clients with skilled, practical counseling on labor and employment matters to achieve their business and litigation objectives. And he helps clients identify risks in the context of business decisions in order to minimize unnecessary exposure and be in the best position for a successful outcome in the event of litigation or a labor dispute. His practice extends nationwide and includes employers...

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