Non-disclosure/Non-compete Liabilities with New Hires

When hiring employees for your startup, particularly when they are coming from a larger company, it is important to avoid liability by violating employment agreements your new hire may have had with their former employer. The types of agreements that typically come into play include non-compete agreements, no-hire agreement, non-solicitation agreements, non-disclosure/confidentiality agreements, and invention assignment agreements. Claims may be brought against your new hire, or under circumstances, the former employer may bring a claim directly against you. Claims can include claiming the new hire took and used proprietary or confidential information (such as customer lists), or that the new hire is using a proprietary invention or development that was assigned to the previous employer, or even that the new employer caused the employee to breach his or her agreements, such as a non-compete, non-solicitation, or no-hire agreement. Therefore, it is important for you to be cognizant of whether a new hire had executed employment agreements with their former employer, and what the terms of those agreements are. It is also important to remember that while non-compete, non-solicitation, and no-hire agreements are typically limited in duration and scope, non-disclosure/confidentiality and invention assignment agreements do not expire (unless the information covered by the NDA becomes non-confidential or the proprietary rights of the inventions under the assignment agreement expire). Preferably, the new hire will have a copy of their agreements for your and your company’s legal counsel to review to understand what the new hire’s restrictions are (and how to work around them, if necessary and possible). Upon hiring a new employee who is subject to employment agreements with their previous employer, you should at the very least have signed written representations from the new hire that accepting employment with you does not violate any employment agreements that they may be subject to (such as a non-compete or no-hire agreement). Your offer/hiring letter or packet or employee handbook (if you have one) should also make clear that new hires are expected to comply with any employment agreements they have signed with their previous employer, including not using any confidential or proprietary information used with their previous employer even if the new hire believes that the information belongs to him or her; new hires should discuss with management or company counsel if there is a question of whether a potential course of action would violate their agreements with their previous employer.

Leave a Reply

Your email address will not be published. Required fields are marked *