Avoiding Liability When Hiring New Employees from Competitors

The job market is so hot right now that applicants often have their choice of employers.

As you interview possible candidates, you may meet with people who work with your competitors. These prospects know your industry and have inside knowledge of how other businesses that do what you do function.

Be careful when hiring new employees with previous experience working with your competitors. You do not want to incur liability for their violations of employment and non-compete agreements, or for acquiring trade secrets.

Here are five tips to follow when interviewing possible job candidates who have worked for your competitors in the past.

1. Inquire About Restrictions

Do not ask about confidential information during the interview process, such as the names of clients or products in the pipeline.

But you are within your rights to inquire whether an interviewee has a non-compete agreement with their current employer.

This situation is best-handled upfront, not later on in the hiring process.

2. Request a Release

What if someone is looking for a job with you and their employment contract prohibits them from working in the same industry or for a competitor? How do they plan on pursuing a job with you?

Your candidate may have discussed moving on with their current boss, and have their blessing.

Maybe they are looking to go in a different direction in the industry, where they will not need the information they acquired. A different career path may not conflict with any knowledge or contacts they have from their former position. Their old boss can sign a release from their previous agreement.

A release from their current employer will protect you from any later liability. They will not be able to accuse you of “poaching” the employee or otherwise inducing them to break their contract.

3. Remind Them of Their Obligations

You should bring up the subject of trade secrets and confidentiality when you are negotiating with a possible new employee.

Tell them that you expect them to abide by their obligations to their current employer. You would expect them to protect your own confidential information in the same way if you were to hire them.

Even if they were not privy to trade secrets or classified information, they must exercise professional discretion and courtesy when it comes to soliciting a previous employer’s customers, employees, or contacts.

Even if they choose not to follow your instructions, you can protect yourself by making your position on this clear from the beginning.

4. “Chinese Wall”

Some businesses, like investment bankers and law firms, use the concept of a “Chinese wall” to shield employees from certain cases or accounts where their previous involvements may create conflicts.

If your new hire is not allowed to access files with information which could raise issues due to her previous employment, this is evidence that you made a reasonable effort to protect them and your business from problematic issues.

5. Check with Your Attorney

It’s always advisable to check any hire about which you have concerns with your attorney.

A proactive consult can save you many headaches and possible liability later on.

Hiring New Employees: Do Your Due Diligence

When hiring new employees from companies that compete with your own, make sure you cover all the bases.

Ask about their prior obligations and restrictions, and make clear your expectations and protocol in cases where there may be a conflict.

For more tips on protecting yourself and your business, check out our blog.

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