By Josephine Ko
The Daily Record Newswire
Hiring top talent has become a monumental challenge for organizations of all sizes across all industries in Oregon. With the national unemployment rate at 4.7 percent in May and the state unemployment rate holding steady at 4.5 percent over the last few months, employers face an especially tight labor market. The most successful employers stay ahead of their competition by being quick and smart about their hiring decisions.
Recruiting the right talent can be a tricky maze for employers to navigate. Oftentimes, the most desirable candidates come bound to noncompetition and non-solicitation agreements with current or former employers. One misstep and employers could become embroiled in costly litigation. But the possibility of litigation alone should not scare a firm into not hiring that key employee. While noncompetition or non-solicitation agreements pose hurdles (as they are meant to), savvy employers can overcome them.
Identify any restrictions
Ask whether the candidate is subject to any noncompetition, non-solicitation or other employment agreement or confidentiality clause that might restrict his or her ability to work for another employer. This applies to salaried and hourly workers alike. Sometimes these terms are wrapped into other agreements. Ask independent contractors too, even though they will not be treated as employees and even if the "work" consists of an endorsement or something else not traditionally viewed as work. Independent contractors may be subject to restrictions from prior employment and projects; don't be caught unaware.
Perform due diligence
If there is an employment agreement, ask for a copy of it and review the terms carefully. Each state has different laws governing employment agreements. For example, noncompetition agreements in Oregon can be enforced only under certain circumstances involving timing, scope, duration and salary thresholds.
A competitor may have been overzealous in drafting its agreements and missed key requirements or terms. Evaluate the enforceability of the noncompetition or non-solicitation restrictions. Also consider when the risk of entering a litigation minefield is too high.
If a prospective employee says there are no employment agreements, make sure to document this representation in a signed, written acknowledgment. Be clear that reliance on this representation factored into the hiring decision. The firm also could choose to add a condition of employment prohibiting the incoming employee from bringing or using confidential information belonging to former employers or other third parties.
Lawsuits over noncompetition agreements have been on the rise, especially in competitive industries with a high demand for a small pool of top talent. Some organizations are notorious for vigorously enforcing noncompetition and non-solicitation restrictions through expensive litigation. This is not the time to be penny wise and pound foolish.
Weigh potential risk and reward
Unique and highly-skilled candidates who fit a firm's needs rarely come around twice. They are likely to be snapped up by shrewd competitors who recognize their long-term value in spite of any inherent risk.
A hiring decision should not be based solely on the existence of an enforceable noncompetition or non-solicitation agreement. Instead, personnel should review agreement terms and then consider how these restrictive covenants would affect the company's operations and competitiveness in the market.
Remember that these restrictive covenants will eventually expire. The relative short-term risk and cost may be worth absorbing in exchange for a leg up on the competition and long-term success in the market. If the budget and timing allow, the possibility of "garden leave" could be explored.
Take necessary precautions
Establishing appropriate protocols might be enough to satisfy the terms of the noncompetition or non-solicitation agreement at issue. In these situations, remind the new hire not to use any confidential business information or engage in any other conduct that would violate his or her ongoing obligations to former employers.
For the right candidate, it might be worth modifying the role and responsibilities of the open position in order to bring that person aboard without triggering or running afoul of the noncompetition or non-solicitation agreement. This may or may not make sense depending on budget, headcount limits and other business considerations.
In the end, the only ways for an employer to be absolutely certain that it will not be at risk of being sued are to contact the former employer for confirmation or to initiate court action for a declaratory judgment ruling on the validity of the restrictive covenants. Although a company may be tipping off its competition, it may be able to implement protocols and job duty modifications that resolve the competitor's concerns.
A company also may be able to "buy out" the restrictive covenant. However, this isn't always the case. Under these circumstances, seek guidance if needed to help carefully craft the proper communications, negotiate the terms, and avoid making a mistake.
Invest in training and enforce protocols
Hiring is a huge investment of time and resources. Protect the investment by ensuring that a new hire understands the protocols put in place to protect both the individual employee and the company, as well as the consequences for violating them. After all the hard work, the last reward a company wants is a cease and desist letter.
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Josephine Ko is an attorney at Barran Liebman LLP. She advises and represents employers in Oregon and California with employment law matters. Contact him at 503-276-2102 or jko@barran.com.
Published: Tue, Jul 12, 2016
