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Employee Poaching & Non-Compete Agreements

Florida non-compete lawyer Jonathan Pollard discusses considerations related to employee poaching or raiding and non-compete agreements.  This discussion addresses the widespread use of non-compete agreements in today’s economy, issues related to contractual choice of law and challenging choice of law and precautionary measures companies can take when hiring away employees of rivals.

Over the past decade, there has been a dramatic increase in non-compete litigation.  This is not anecdotal— it is statistical.  Numerous analyses of court dockets at the federal and state level have confirmed that non-compete litigation is more common now that it was a decade ago.  In previous posts, I have offered my assessment of the factors driving this increase.  Regardless of the reasons behind the uptick in non-compete litigation, that is the reality of the current market.

In light of this, companies must be mindful of the risks attendant to hiring away talent from industry rivals.  In recent months, I have heard the terms employee poaching and raiding thrown around.  In my view, hiring away one or two employees does not rise to the level of employee poaching or raiding.  But hiring whole teams of employees does.  Regardless, when hiring away talent from a competitor, companies must be cognizant of the risks and must approach the undertaking in a manner that is strategic and methodical.

First, the company must identify its targets.  This is purely a business decision:  Who are the targets, what is their value, and what can they bring to the company?  Once the targets have been identified, the focus shifts from an assessment of their possible value to a legal analysis.   The first legal question is, “Do the targets have non-compete agreements?”  In today’s world, the answer to that question is probably yes.  If the targets have non-compete agreements, that potentially creates some exposure for the company in the form of a tortious interference or unfair competition claim (common law or under a state unfair competition statute like FDUTPA).

From there, it is necessary to review the relevant employment agreements with an eye toward non-compete issues.  The analysis of the non-compete issues begins with choice of law.  State law governs non-compete issues and there is tremendous variation in non-compete law from one state to the next.   For instance, California will not enforce employee non-compete agreements— they are considered void as against public policy.  States like Illinois and New York will enforce non-compete agreements, but generally subject those agreements to fairly rigorous scrutiny and enforce them in as narrow of a manner as possible.   Florida, on the other hand, tends to be an aggressively pro-non-compete state.  This is one of the reasons why many companies that have any connection to Florida use contractual choice of law provisions that call for Florida law.

Once the governing law has been identified, the company has to analyze its likelihood of beating the case under that law— in other words, if the non-compete agreement is unenforceable, there is no claim for tortious interference.  If the chosen law is unfavorable, consider whether or not the choice of law might be subject to attack.  For example, a company in Minnesota hires citizens of Minnesota to work in its Minnesota office, but that company also has a Florida office.  The company uses Florida choice of law in its employment contracts because Florida non-compete law is more pro-employer.  In that situation, a litigant may be able to defeat Florida choice of law, get Minnesota law applied and – as a result – have a better shot of beating the case.

Even if it appears that there is a strong chance of beating an employee poaching or raiding case, companies have to understand that the law in this realm is often a grey area.  The facts and the law can appear to be on the company’s side, but a rival could spin those facts differently and wind up with the upper hand.  Bottom line:  When a company engages in employee poaching or raiding, particularly if it is hiring away a whole team of employees, it should expect litigation.  It’s a cost benefit analysis.  If those employees are valuable enough, and the law is either good or mixed, then it may be worth the risk.

At that point, once the decision to hire these employees has been made, the company should implement certain intake procedures that may help it later defend a non-compete case.  This process should be supervised by a lawyer who has experience litigating non-compete cases.  All of this is discussed in the video.

Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida.  He focuses his practice on competition, particularly cases involving non-compete, trade secret and antitrust disputes and represents clients in Florida and throughout the country.  He is licensed in all Florida federal and state courts and routinely represents clients in Fort Lauderdale, Miami, West Palm Beach, Fort Myers, Tampa, Orlando, Jacksonville, and beyond.  His office can be reached at 954-332-2380.

 

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