Great workers give their employers a competitive edge that may mean the difference between success and failure in a tough business environment. That means the market for top talent is tight these days—you know it and so does the competition. That’s why more and more employers are using noncompete agreements to ensure competitors can’t lure away star employees.
When hiring new employees, be aware that they may have signed noncompetes or other employment agreements with their previous employers. Ask if they have. If they did, ask for a copy. Then have your attorney review the terms before you make an offer.
Here’s why: Knowingly inducing someone to breach an existing contract may expose your company to charges of “tortious interference” with a business relationship or contract. And that can mean your organization is on the hook for any business losses caused by the new employee’s departure.
Recent case: Amigo Broadcasting hired two radio personalities to perform a radio show that turned out to be wildly popular among its Hispanic listeners. The employees signed noncompete agreements.
After they became dissatisfied with their pay and bonuses, the radio jocks met with a competing broadcasting company and signed on for more money. They then simply didn’t show up at Amigo. When their former employer contacted them, they said they didn’t need Amigo anymore. Two days later, they performed their show for the new station.
Amigo sued the competitor, alleging that it knew about the employment agreements and therefore wrongly interfered with those contracts by inducing the performers to leave.
The 5th Circuit Court of Appeals said the case could go forward because the new company knew—or should have known at the time—that the performers were under contract with Amigo. (Amigo Broadcasting v. Spanish Broadcasting System, et al., No. 06-50748, 5th Cir., 2008)
Final note: Involve counsel early on if you hire an applicant and later find out about an existing employment agreement. Be prepared to show you didn’t know about or suspect the existence of an agreement.
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