How to Avoid Liability When Hiring Employees from a Competitor

No one wants to get sued after making a new hire, especially if the suit seeks to prevent the new hire from doing any work.  So how do you avoid it?

Be aware of your and the applicant's duties before any interview, at the interview, and after hiring.  In addition to your normal investigation of an applicant's background, review these principles.

Before the interview.  Avoid communications that would permit the current employer of the applicant to claim that the applicant breached fiduciary duties or an employment agreement and that you conspired with the applicant to do so.  Someone can prepare to leave employment, but should not compete with the current employer while employed. No discussions with clients or customers of the current employer about leaving should be held before the employee has left.  Ensure that the applicant does not copy the current employer's customer list, secret formula, or financial information.

At the interview.  Ask the applicant if there is a restrictive covenant, and if he or she would be willing to sign a statement that no restrictive covenant exists, that no prior employer property or information such as confidential financial information, trade secrets or customer lists was taken,  and that otherwise there is no impediment to acceptance of the new position.  Ensure that it is understood that the applicant should treat his or her current employer with good faith through and after the last day of work.  If there is anything sensitive, consider having a second person sit in on the interview and have a file memorandum written up stating what was discussed. (If sued, the applicant might blame you for everything.)  Consider having an attorney review the memorandum.

If the applicant shows you a restrictive covenant, you should have an attorney review it to see if it is enforceable, and to judge its scope and applicability to the new job and the applicant.  Document any advice received.

After hiring. Ensure that your new employee is not using any property or information from the old employer, violating the prior employment agreement, if any, or defaming or disparaging the prior employer.

Trust your instincts. If you feel suspicious about anything, consult a knowledgeable attorney at any point during the process and document the advice received.  An ounce of prevention is worth a pound of cure.

Have a question? Get in touch with me by telephone at 312-223-1699 or by email at


Real Time Web Analytics