Here is another common hiring scenario we see play out: A company has made a conditional offer of employment to a candidate who informs them that he or she just remembered that they signed a non-competition agreement upon hire by their current employer. The candidate provides a copy of the document to the company, which is now in the position of having to determine whether hiring this individual also means inviting a lawsuit from that employer for interfering with the non-compete. How can the potential new employer determine the risks presented by those restrictive covenants?

The first step most companies in this scenario take is to contact legal counsel to ask whether the non-compete is enforceable. The answer to this question may not be as important to the overall analysis as the client may believe. Legal counsel may determine that the non-compete is so legally deficient that the chances of any serious attempt to enforce its terms are minimal. However, in most cases, the lawyer responds that the non-compete may or may not be enforceable based on the specific circumstances and the tendencies of the judge asked to review its terms.

More importantly, the former employer’s decision whether or not to pursue enforcement of the agreement may be based more on their fear of competition or anger at the former employee than a calculation over its ultimate enforceability. Even a threat to sue the former employee and new employer can delay or deter the hiring decision in situations where the restrictions may not ultimately be upheld.

In addition to a legal review of the non-compete, the company considering the candidate should ask whether the position actually involves work activities that would violate the terms of the restrictive covenants. In many cases, the employee is not actually competing with the former employer. In others, the new employer may devise a way to employ the worker without assigning tasks that violate the agreement until its term has expired.

The potential new employer may also ask the candidate about their assessment of their current company’s reaction to them accepting the offer. Are they likely to view this as a mortal threat to their business? Have they pursued other employees under similar agreements who have left in the past? While input from an applicant seeking employment needs to be reviewed in this context, their answers may assist the new company in evaluating the risks posed by hiring this person.

Ultimately, the decision to hire a worker under plausibly applicable restrictive covenants involves weighing the benefits offered by that person against the legal and financial risks associated with a claim by the former employer. If the worker is to be employed on an at-will basis, some companies may decide to hire that individual, but reserve the right to end the employment relationship if it appears that the former employer will attempt to enforce the non-compete agreement.

For more information, please contact me or your regular Parker Poe contact. Click here to subscribe to our latest alerts and insights.