Considerations for Hiring Employees with Restrictive Covenants
What are Restrictive Covenants?
- A non-solicitation agreement is where an employee agrees to not pursue a company’s clients.
- A non-compete agreement is a contract where one party agrees to not compete in a particular industry or line of work.
- A non-disclosure agreement is a contract where one party agrees to hold information in confidence that was shared as a part of doing business.
Interviewing a Prospective Employee Subject to Restrictive Covenant Agreements
When considering a new hire, be sure to proceed with caution when hiring someone who is still subject to a non-compete or non-solicitation agreement with a prior employer. First, during the interview ask the prospective employee a specific and direct question about whether they are subject to a restrictive covenant, such as a non-compete, a non-solicitation agreement or non-disclosure agreements. If the answer is yes, try to obtain more details.
Second, it is important to have the prospective employee provide the contracts that include these restrictive covenants. These agreements can be difficult to understand, and often the prospective employee is not fully aware of the implication and scope of these agreements. It is important to involve counsel to evaluate these agreements and determine their legal risk to the employer.
Hiring an Employee with a Restrictive Covenant Agreement
Should you and your counsel determine to hire the employee who is subject to the restrictive covenant, certain steps should be taken to minimize liability. Make sure to prepare an offer letter. That offer letter needs to clearly state that the employer understands the prospective employee is subject to a restrictive covenant and that the employer understands the prospective employee needs to abide by that covenant.
Please note, if you asked a prospective employee if they are subject to a restrictive covenant and they indicated they are not, it is important to document this claim in an offer letter as well.