Every person you hire brings risk to your organization. An employee could harass someone. Or steal from your organization. Or steal from a client. Of course, those are some extreme examples of risk. Then there are others, like those posed by hiring people with a noncompetition agreement. Which begs the question: How should you handle such individuals?
Noncompetition agreements are designed to protect an employer’s business interests after a separation. They are typically limited to a specific period of time (six months to two years) or by geographic scope or to particular competitors.
For example, suppose Jose is the top salesperson and has developed solid relationships with Company X’s customers. If he were to be hired by Company X’s competitor in a sales role, Company X would be concerned about losing business for good reason. All the time and resources spent to help Jose build those relationships would be lost. The same would apply to people who make Company X’s secret sauce or have knowledge about the inner workings of how Company X does business. In other words, noncompetes serve to protect the business.
That isn’t to say that there aren’t valid criticisms of noncompetes. In fact, President Biden has indicated that he would like to see a nationwide ban on noncompetition agreements. Meanwhile, Massachusetts and Washington have already put major restrictions on them, particularly for low-wage workers. And in California, noncompetes aren’t even enforceable. However, in many, many states, such agreements are still alive and well.
As a recruiter, you play a major role in determining if a noncompetition agreement exists and what your organization is going to do about it. Hiring someone with a noncompete is a risky proposition, especially if your company is in the same industry as the candidate’s previous employer. In fact, some attorneys might say you’re asking for trouble — because when a competitor knows that you hired their previous employee with a noncompete, they might sue you.
The claim is called tortious interference with contract. That’s a fancy way of saying you are asking the previous employee to violate their agreement with their previous employer by hiring them. The previous employer will sue your organization and the employee and seek monetary damages and an order prohibiting the employee from working for you.
This will all happen very quickly, likely within a week or month of the hire. It will also be incredibly expensive for your organization to defend itself because, you know, attorneys aren’t cheap.
Here are some steps you can take regarding candidates with noncompete agreements:
Not knowing about a noncompetition agreement is way riskier than knowing. After a candidate is hired, the person always spills the beans about a noncompetition agreement to someone within the organization at some point. And if that person is a manager, then that legally means that the company now knows about it. Keeping the employee subsequently exposes the organization to the risks described above.
So ask candidates if they have a noncompetition agreement with any current or previous employer. (You can also ask on your application, but always follow up in your screen.) If the response is “yes,” proceed with caution. (See below.)
Talk with your attorney and/or leadership about their position on hiring individuals with noncompetes. Employers that loathe risk will move on from a candidate with such an agreement. Ones that are more tolerant of risk will ask more questions, including requesting to look at the agreement, asking about the circumstances of how the agreement came to be, and requiring the agreement be analyzed by an attorney. Definitely do not take on the decision-making alone. You may not be subject to legal liability yourself, but your employment could be on the line.
It is possible that as the new employer, you could put perimeters on what your new hire with the noncompete will do for you during the noncompetition period.
For example, suppose that Tina used to make hot sauce and has a one-year noncompete with her previous employer, a hot sauce company. After discussions with her previous employer, you decide to hire her only for your mayonnaise line for the first year of her employment with strict instructions to the hot sauce division that they are not to talk shop with Tina. You also direct Tina that if she advises on hot sauce, she’ll be terminated.
Ultimately, while over the past five years, there has been movement to end noncompetition agreements as we know them, that doesn’t mean you can hire without regard to them now. Be careful, ask questions, and consult decision-makers.
