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The Corporate CounselorLJN NewslettersNewsSections

Risks of Hiring Employees from Another Firm

By Mark Blondman and Brooke Iley
July 27, 2006

The scenario is a familiar one: An individual decides to leave his current employment and accept employment with a new employer. As it turns out, the employee has signed an agreement with the former employer restricting his or her right to compete with the former employer (non-compete agreement), prohibiting him or her from soliciting employees or customers of the former employer (non-solicitation agreement) and/or requiring him or her to maintain the confidentiality of the former employer's trade secret and/or proprietary information (confidentiality agreement). This article focuses on the risks faced by the new employer in hiring such an individual.

In most jurisdictions (California being a prominent exception), courts will enforce non-compete and non-solicitation agreements if the employee received adequate consideration for the commitments made (which can include new employment) and the restrictions contained in the non-compete and/or non-solicitation agreements are both temporally and spatially reasonable. An employer aggrieved by the former employee's violation of his or her non-compete, non-solicitation and/or confidentiality agreement may seek injunctive relief to prevent violation of the agreements made, as well as seek and recover damages caused by the violation. There has been significant litigation addressing the respective rights of the former employer and former employee and this article is not intended to address those issues.

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