Liability of new ER in regards to hiring ee with non compete
Does an employer have any liability if they know of a non compete agreement that an applicant has and they hire the applicant anyway. I know it is bad business of course but I am trying to explain what liability the actual ER may have to my SR. Mgt. Thanks,
1 answer | asked Jan 18, 2008 4:11 PM [EST] | applies to Ohio
Answers (1)
The new employer has as much, if not more, exposure to a non-compete claim
Non-competition agreements are contracts, typically between two parties, a company and an employee. A competitor who has not signed the non-compete is not a party and cannot be sued by the company for a breach by the employee, since the competitor is not a party to the contract.
However, if the competitor hires the employee knowing that the employee will breach his or her contract with the Company, then the competitor could be liable for "interfering" with the contract between the Company and the employee. This claim is known as tortious interference with business or contractual relations, or tortious interference for short.
A suit for tortious interference can be more damaging to the competitor than the employee, since breach of contract claims have limited remedies, while a tortious interference claim has the same remedies as a contract claim plus it allows the Court to award punitive damages against the interfering employer.
Consequently, Senior Management should tread carefully and consult with a qualified employment lawyer before bringing the employee on board. It is possible to work around, reduce or even eliminate non-compete restrictions, but you need to understand the risks.
Best regards,
Neil Klingshirn.
posted by Neil Klingshirn | Jan 21, 2008 11:24 AM [EST]
Non-competition agreements are contracts, typically between two parties, a company and an employee. A competitor who has not signed the non-compete is not a party and cannot be sued by the company for a breach by the employee, since the competitor is not a party to the contract.
However, if the competitor hires the employee knowing that the employee will breach his or her contract with the Company, then the competitor could be liable for "interfering" with the contract between the Company and the employee. This claim is known as tortious interference with business or contractual relations, or tortious interference for short.
A suit for tortious interference can be more damaging to the competitor than the employee, since breach of contract claims have limited remedies, while a tortious interference claim has the same remedies as a contract claim plus it allows the Court to award punitive damages against the interfering employer.
Consequently, Senior Management should tread carefully and consult with a qualified employment lawyer before bringing the employee on board. It is possible to work around, reduce or even eliminate non-compete restrictions, but you need to understand the risks.
Best regards,
Neil Klingshirn.
posted by Neil Klingshirn | Jan 21, 2008 11:24 AM [EST]
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