Employers should be asking potential employees and even independent contractors whether they previously signed a non-compete/non-solicit agreement. Of course, some employees may have forgotten or are unaware they signed one – if possible ask to see their previous employment agreements to screen for any restrictive covenants.
What should a potential employer be looking for:
- a non-compete agreement;
- a non-solicitation agreement;
- a non-disclosure agreement; and
- an anti-raid provision.
The first is self explanatory. A non-solicit could have the effect of a non-compete by keeping a new hire from contacting previous customers/clients. A non-disclosure could have a non-compete effect depending on the circumstances (i.e. a non-disclosure that prevents an employee from disclosing previous client/customer information). The anti-raid prevents an employee from attempting to hire folks from their previous place of employment.
Why should the employer be worried? When a company sues over a non-compete they almost always sue the former employee and their new employer. By doing so a plaintiff can shut down the employee and also the employer who may or may not be benefiting from the former employee’s non-compete breach.
Employers should be pro-active in the hiring process in determining whether a non-compete is in place. If one is in play, the employer needs to assess its risk, hopefully with the help of a lawyer.
