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Before you hire from the competition, read this

Before you recruit a rock-star employee from the competition, be sure to protect your company.

Before you hire from the competition, read this
[Photo: Ryan Magsino/Unsplash]

In this tight labor market, employees are considering their options. A 2020 report by employee engagement platform Achievers found that roughly two-thirds of employees said they may leave their jobs in 2020.

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That’s good news for companies on the lookout for talent. However, when hiring employees from competing firms, organizational leadership needs to protect against certain risks.

“I’ve been doing this for 30 years. I’ve never seen more job movement,” says Steven L. Manchel, a shareholder in employment and recruitment law firm Manchel & Brennan and author of “I Hereby Resign.” “It raises the stakes for the company that lost the employee, and it raises the stakes for the company that’s getting the employee.”

And the very reasons an employee may be attractive as a new hire—such as industry expertise and knowledge of the competition’s strategies—could be cause for concern. If a new hire shares proprietary information or violates an agreement made with a former employer, your company could face legal consequences. “The law generally prevents a new employer from obtaining trade secrets or proprietary information of a competitor,” says employment attorney David Reischer, CEO of LegalAdvice.com, a legal services referral service. “Claims of ‘tortious interference’ with a business and ‘misappropriation’ [of trade secrets] are typical causes of action that would be made in a lawsuit.”

To help protect your company from inadvertently getting into legal or reputational hot water, be sure you put a few practices in place:

Prepare in advance

Adrienne Cooper, chief people officer at FitSmallBusiness.com, a business information platform, says you should do some prep work before having even preliminary conversations with a prospective hire from a competitor. “Be very clear about what you want to bring into your organization, both a cultural contribution from that individual, as well as their skill sets and experience, and how that’s going to fit in your strategy and evolution, versus framing it as, ‘Let’s go poach and maybe that’ll help us,'” she says. It’s also critical to understand employment laws in your state and any issues that may be particular to your industry.

Manchel cautions that even preliminary conversations with a prospective hire from a competing firm can have pitfalls. Let’s say you’re a high-level employee who just came out of a strategy meeting and, unbeknownst to your current employer, you’ve got a job interview in which the interviewer asks you, “Where do you see the industry going?” Having a general discussion is one thing. “It’s her expertise, it’s her experience, it’s her vision of the future. But if she layers in what she knows is the next-year strategy for her current company, she’s crossed the line,” Manchel says. “My advice to anyone who’s doing the hiring and anyone who’s being recruited is to think very clearly about what’s publicly known and what’s not.”

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Ask about agreements

Before you recruit a talented employee who works at a competitor, ask about the agreements the employee has signed, including a non-compete agreement, a non-disclosure agreement, and a non-solicitation agreement.

These agreements may limit the capacity or role in which the employee can work for a competitor, place restrictions on the information that is shared with an employer, or prevent working with former customers, employees, or others.

Manchel recommends asking for copies of the agreements the prospective employee signed so you have a clear understanding of the restrictions in place. Cooper agrees. “It is not helpful for you if the person has injunctions preventing him/her from doing work after joining your company,” she says.

Beware of past behavior

The actions employees take—or even signal they intend to take—before leaving an employer could put your company at risk. In addition to whether the prospect will be a good fit, examining if they’ve behaved improperly is another mitigating factor. “Let’s say you’re recruiting a salesperson, and she walks in and says, ‘Hey, by the way, every one of my clients is ready to move with me.’ You need to run away, because this is someone who’s pre-solicited her book of business. That is, in every state I’m in, that’s a serious violation of the governing wall,” Manchel says.

Conversely, learning more about the reason the person wants to or has separated from a previous employer can be enlightening. In some cases, the employer may have acted in such a way that the agreement in place is voided. Consult your legal counsel about such issues, especially if the person is at a high level or has access to sensitive company data.

Improve your own practices

“It is a good idea to have a written policy in place that warns all employees not to take proprietary info and data received from previous employment,” Reischer says. In addition, if you make an offer to the employee, make an explicit claim in the offer letter that employment may be terminated for bringing or using or improperly disclosing confidential or proprietary information from previous employment, he recommends.

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Review your practices around data management and make improvements if necessary, he adds. “Bringing a lawsuit for when an employee steals company property is expensive and time-consuming, and always the final resort. The best way to protect company information is to limit access and track access,” Reischer says. Be sure employees that you do hire from competitors have proper supervision and that you conduct regular check-ins to be sure they’re not using information or engaging in practices that are restricted by past agreements.

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About the author

Gwen Moran writes about business, money and assorted other topics for leading publications and websites. She was named a Small Business Influencer Awards Top 100 Champion in 2015, 2014, and 2012 and is the co-author of The Complete Idiot's Guide to Business Plans (Alpha, 2010), and several other books

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