Hunt & Associates P.C.

New Hires and Contractual Duties to Prior Employers

Employers want to know who they’re hiring.  If a new hire has a noncompetition, non-solicitation or confidentiality agreement with their last employer, there can be a risk of litigation to their new employer.  The new employer may risk a law suit claiming wrongful interference with contractual relations between the new hire and their former employer or for misappropriation or misuse of the prior employer’s trade secrets.

It’s important that employers discover what contractual obligations a potential new employee has to their former employer before making any offer of employment.  If a potential employee is contractually obligated to their last employer, it’s essential to actually read the contract in question to determine what, if any, limits it puts on the potential employee’s value to the new employer before a job offer is made.

If a prospective employee is contractually obligated to a prior employer it’s often, though not always, helpful to discuss those obligations with the prior employer to determine whether or not a breach of the employee’s obligations is likely to occur if employment is offered as well as how any possible breach can be avoided.

In some cases a call to the previous employer is necessary to reach agreement for a partial or complete release of the new employee from their contractual obligations to their former employer.  For instance, if the new employee will be bringing a book of business they developed at their last employer with them, it may be necessary for the new employer to negotiate the purchase of that book of business with the prior employer.  In some instances, this may give the new employer an opportunity to buy ownership of the employee’s book of business for itself even though the employee was only restricted by a noncompetition or non-solicitation agreement from serving that clientele after leaving their last employer.

In any event, simply by making the call and the effort to talk with the prior employer, a prospective new employer will get a sense of how aggressively the prior employer will pursue any claims they might have against either the employee or their new employer.

Finally, any new employee who brings expertise or new business contacts with them should sign a written employment agreement which addresses the employee’s obligations to previous employers through representations and warranties to their new employer.  Also, in many instances the employee should agree to indemnify and hold their new employer harmless with respect to certain claims which the employee’s past employers might assert against the new employer.

As with most things, attention to detail and a bit of effort at the outset of a new employment relationship can ultimately save an employer from much greater costs of time, energy and business later.

© 2/22/2011 Lawrence B. Hunt of Hunt & Associates, PC

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