I am often asked to provide advice to an employer about hiring someone who has a non-compete. A non-compete may mean a true non-compete that restricts work, a non-solicitation provision that prevents going after customers, and an anti-raid provision that prevents hiring away other employees. Usually the new employer wants to know if the new employee or new employer will get sued and whether the non-compete is enforceable. Some issues to consider up front:
- Is the new employer actually a competitor of the old employer? (Difficult to have a non-compete violation if they aren’t or a former employer that will care.)
- Will the new employee’s scope of work with the new employer violate the non-compete? (This applies to the type of work the new employer is doing, where they are doing it (geographical restrictions), and the duration of the non-compete.
- What is the choice of law for the non-compete? (What state’s law controls?)
- Is there a forum provision? (Where will a lawsuit be filed?)
- Is the non-compete enforceable? (The $50,000 question. The follow up is if it isn’t what would a judge do with it in terms of reformation?)
- Has the former employer sued employees over non-competes?
- Did the former employee depart on good terms? (If the former employee left in the dead of night with no notice and it is believed they took company information there is more likely to be a lawsuit).
The answers to these questions usually give the new employer a general idea about a potential lawsuit. There are of course no guarantees. With respect to non-solicitation provision, the new employer has more control of the situation. The new employer can restrict the new employee from calling on customers or attempting to hire employees. That’s not the same for the true non-compete provision. Hopefully this type of discussion/analysis takes place before the hiring decision is made. The new employer should also be actively involved in assisting the new employee with the actual departure.