Restrictive covenants in employment agreements often contain prohibitions against a departing employee soliciting his or her former co-workers on behalf of the new employer. Last week, the North Carolina Court of Appeals considered a situation where the new employer hired the restricted former employee's co-workers, but never appeared to actively solicit their employment.

In Inland American Winston Hotels v. Crockett, the defendants' employment agreements prohibited them from "soliciting, recruiting or inducing" their co-workers to leave employment for a set period of time following their departure. They subsequently left employment, formed their own company, and hired their former employer's chief accounting officer. The former employer sued, claiming that the hire breached the employee non-solicitation agreement.

The defendants contended that they never solicited or induced their former colleague to leave his employment. He joined their venture without any persuasion. The plaintiff claimed that an offer of employment is in and of itself a solicitation in violation of the restrictive covenant.

The Court of Appeals agreed with the defendants, affirming dismissal of the lawsuit on summary judgment. The plain language of the non-solicitation agreement makes clear that hiring alone is not prohibited. In the absence of evidence showing solicitation or inducement, the defendants were within their rights to hire the accountant. Had the former employer wished to prohibit the defendants from hiring its employees, it could have included this in the employment agreement.

This decision raises issues for employers seeking to keep former employees from raiding their colleagues. While the restrictive covenant can be expanded to include hiring, this would not impact most situations. Usually when an employee leaves, he or she joins an established business entity. That entity and not the former employee actually hires the co-worker. The restrictive covenant between the employee and former employer cannot bind that new employer's actions.

Often, it is difficult for the former employer to discover direct evidence of solicitation. The departing employees will claim that they followed their former colleague without any inducement. Based on this decision, in the absence of such evidence, it may be difficult to effectively enforce employee non-solicitation and no-hire agreements.