Competing for Great Employees

Bad news for employers. The economy is getting better. Affordable and talented employees are becoming harder to find. Employees are quitting more now than they have in the last six years. Minimum wage increases have been peppered throughout the United States. Welcome to the competition for great employees.

Poaching has a huge negative connotation, but the reality is that there are only so many places you can find great employees . Either you are preventing great employees from leaving or you will find them working for a competitor. Poaching, for the most part, comes with the territory of healthy competition, but some employers can push the ethical or legal line in the effort to find talent.

Company Culture

If you are reading this looking to see how you can stop losing employees to your competitor, you should be aware that regardless of any legal protections that you may impose, nothing can compare to a healthy, positive working environment. Culture is king.

Legal Issues In Poaching Employees

Generally poaching employees from a competitor is actually legal, but there are few circumstances that can leave the poacher in legal trouble. Understanding these can help you both legally poach employees and prevent your employees being poached.

The restriction on poaching from the competition is centered around agreements (that are valid) between the former employer and employee and the new employer’s involvement in the subject matter of that agreement. For example, an enforceable non-compete or restriction of divulging trade secrets can be an effective defensive tool against being poached.

Interference of a Non-Competition Agreement

Most employers are familiar with non-competition agreements and the restrictions they may impose on employees; however, less familiar is the prospect of being sued for hiring an individual who is bound by a non-compete.

An employer may be held liable for interference with a contractual relationship between employee and his or her former employer. The specific elements of tortious interference of contract (the legal cause of action) differs slightly between state to state, but generally the former employer must prove: (1) the employee had a valid contractual relationship; (2) new employer had knowledge of the contractual relationship; (3) new employer intended to induce employee to breach contract; (4) the contract was in fact breached; and (5) the employer was damaged.

Note: An interference of contract claim will often come even if the plaintiff may not have a valid claim. Threatening or even filing such a claim can scare a new employer from even considering a potential candidate; however, if a former employer feels wronged, there are not many legal alternatives. Though any lawsuit should be taken seriously, be also careful of the possibility that demands from the employee’s former employer may be an empty threat. Sending out empty threats can often backfire resulting in a negative reputation.

A Valid Contractual Relationship

In just about every state except California and Oklahoma, non-compete and similar restrictions of trade for employees are tolerated by local courts. California pretty much prohibits non-compete provisions outright, where other states enforce compete restrictions as long as they are narrowly construed in time, place, and scope.

Perhaps if you are in California or you have a contract that is probably not enforceable in your state you feel that you can ignore the risk of being liable for tortious interference. The risk is that courts are often given the ability to modify the contract agreement in such way to make it valid. For example, a contract’s prohibition for the employee to work within a two hundred mile radius of the previous employer may be modified to thirty miles. In other words, if the defense is that the contract is invalid, the court must determine the contract terms are invalid. Therefore, it is risky to depend upon this defense unless there is clarity that the current terms are not only invalid but even if a court modifies the terms, the contract is still not breached.

Employer’s Knowledge of Non-Compete

The ultimate paradoxical decision is whether you should inquire whether candidates are restricted by non-competes. You may have a defense against a tortious interference claim if you do not, but then you may be blindsided by a cease and desist letter and/or an employee who may be wrapped up in litigation. By screening candidates, you are given the opportunity to fully evaluate the risks compared to putting your head in the sand hoping to stay out of court.

It should also be considered that any employee agreements or offer letters should contain a quick acknowledgement by the employee that he or she is not restricted from entering into the employment relationship with the new employer.

Intentional Inducement to Breach Contract

In some states, courts require wrongful conduct in addition to an intent to induce for breach. In the employment context, the former employer need only show that the new employer had the intent to employ (or continue to employ) the employee despite the  employment causing a breach of the non-compete agreement.

Contract Actually Interfered and Caused Damage

Not all non-competes that are breached necessarily cause damage. Economic losses, if proven with certainty, are the primary means for calculated damages, but equitable remedies of an injunction prohibiting the employee from working with the new employer is usually far more beneficial to the former employer as money damages can be very difficult to calculate and prove.

Non-solicitation of Employees and the Duty of Loyalty

Preventing employees from soliciting other employees to jump ship is a great tool from preventing a mass exodus.

Employee Duty of Loyalty During Employment

Without any contract agreement, your employees have a duty of loyalty to his or her employer (in most states). This means that while they are employed, they are prohibited from scheming with other employees to leave their current employer. This is a great fall back if you have a bad apple employee that risks ruining the bunch.

Non-solicitation Agreements After Employment Terminates

Unlike non-compete covenants, non-solicitation of employee clauses are widely enforceable. Note that in some jurisdictions in California, such clauses are somewhat restricted to the extent that it prohibits indirect solicitation of employees, such as public job postings.

Non-solicitation of employee agreements are most helpful in preventing a mass exodus since they will often prohibit for period after employment an employee from directly contacting a former co-worker for purposes of encouraging them to leave and join the new ship; however,such non-solicitation agreements have little power over the competitor from directly soliciting another company’s employees, except of course under an interference of contract theory.

This about Uber’s campaign, so called “Operation Slog“, where the unscrupulous ridesharing service employed its Uber personnel to hire Lyft drivers for a trip in order to have a captive audience to convince the driver to switch to Uber. Though there may be some federal antitrust implications to this, the act of soliciting your competitor’s employees is generally an acceptable practice.

Nondisclosure, Confidentiality and Trade Secret Agreements

This catch-all tool can be an effective and enforceable method in preventing damage that may be caused from an employee being poached by another company.  It is also something that needs to be taken seriously if you are the one doing the poaching.

Confidential information and trade secrets are valuable assets of a company and is often the true threat when employees move from one employer to the other. What prevents them from taking all the proprietary information they may have learned and handing it over to a competitor?

A nondisclosure agreement prohibiting the disclosure (or even use) of confidential information or trade secrets is very common place in any employment relationship–though it is not automatic. Such agreements will prevent other employers from misappropriating trade secrets or interfering with a contractual relationship as discussed above.

Misappropriation of Trade Secrets and Violation of Nondisclosure Agreement

Once such information is designated as a trade secret, it comes with great protection under the law. The precise definition of a trade secret vary slightly from state to state, but generally a trade secret is information that (1) is not known to the public; (2) derives independent economic value; and (3) is subject to secrecy, meaning it actually has to be kept secret. Accordingly, not all confidential information falls under the category of a trade secret, but all trade secrets can be considered confidential information in a nondisclosure agreement.

A well-crafted nondisclosure agreement will encompass both trade secrets and other confidential information. Once prohibited, a former employee may be allowed to work with a competitor but may be prohibited from disclosing the valuable trade practices and processes that may give value to that employee.

The inherit problem with relying upon this legal protection is that trade secret law and nondisclosure agreements tend to ignore the realities independent of the law, i.e. a person cannot just “unlearn” information, let alone valuable information. Nondisclosure agreements have more impact as a threat of litigation or one’s conscience then in the court room. Such court cases dealing with a breach or misappropriation is very fact intensive. Having to prove that a certain piece of information not only is within the definition of confidential information in the agreement but also proving that it was improperly disclosed is often very difficult.

No-Poaching Agreements with Competitors

An interesting prospect of preventing poaching is to directly enter into a contractual relationship with your competitors to agree not to poach. Does this seem far reaching? Not for eBay Inc. and Intuit or for Oracle and Google. These companies entered into “no-poaching” agreements restricting the hiring and solicitation of each other’s personnel in certain categories, such as managers or supervisors. Google even tried to make a deal with Facebook, but Facebook refused.

In these cases, these agreements were challenged for their unfair competition (anti-trust) implications. For instance, Oracle and Google allegedly entered into the agreement in order to keep salaries low.

This is not to say that these no-poaching agreements can be enforceable. Making a non-solicitation ancillary to a joint venture or other “legitimate” reason will help make the agreement enforceable.  Anti-trust issues may also not apply for smaller companies and industries.

Contact our firm to evaluate your business practice with non-competes and non-solicitation agreements in your jurisdiction.

 

 

Nasir Pasha

By

Nasir N. Pasha is the managing attorney of Pasha Law, providing essential legal services and support to businesses and corporations in California, Illinois, New York, and Texas. He oversees all of the firm’s operations and is a pivotal force in maintaining client relationships and ensuring that each transaction is brought to its best possible conclusion.

Get Business Legal Updates

Please provide your full name.
Please provide a valid email address.
We respect your privacy, and we will never share your information. Unsubscribe at any time.

Related Publications

Feeling smart today? Head over to our stories and test your #legal knowledge in our monthly #PopQuiz. You can also reference all previous Pop Quizzes in the Trivia highlight on our profile. Good luck!

August 19, 2021

Who are we talking to on this #MeetTheTeamMonday? None other than attorney Rustam (Rusty) Abedinzadeh. Little known fact about Rusty? He plays the viola.

August 2, 2021

Can’t think of a better way to spend a #Friyay! Pasha Law attorneys Matt and Nasir reunite in California at the @SanDiegoZoo.

July 16, 2021

Through a five-round championship bout, Matt travels to Texas from California to determine which state is better for business. Will it be a knockout with a clear winner or will it go to the scorecards?

July 14, 2021

Google Spaghettis Another Project and Nets Its 5th Major Lawsuit of Recent Months If corporations are people—and in our current timeline the law considers them as such—then Google is less your intrepid bohemian confidant and more your libertine couch-surfing ne’er-do-well, interminably attempting to maintain face and hold themselves together, come waylay after waylay. In jurisprudence,…

July 2, 2021

Did you know it’s Anti-Boredom Month? The Pasha Law team is weighing in on the ways they battle the boredom. Check out our Instagram stories throughout the month to see what the team’s favorite summertime activities are!

July 2, 2021

The Pasha Law staff in Houston spent a day working to pack boxes at the Houston Food Bank, which has been doing amazing work to keep Houston fed during the COVID-19 pandemic. It was a great opportunity for team building and to give back to the community.

April 9, 2021

Do you need some book, movie, or show recommendations for an upcoming holiday break? Whether you’re looking for personal growth or to take a break from the real world, the Pasha Law team has you covered! Books: The Inner Game of Tennis, by Timothy Gallwey; The Art of Learning, by Joshua Waitzkin; Meditations, by Marcus…

December 21, 2020

We asked our staff about their role models, and attorney Rustam Abedinzadeh said that his parents “taught us the value of hard work, loving your family and those around you, and being respectful to others.”

December 17, 2020

“Where, after all, do universal human rights begin? In small places, close to home — so close and so small that they cannot be seen on any maps of the world. Unless these rights have meaning there, they have little meaning anywhere.”Eleanor Roosevelt.

December 10, 2020

Are you participating in International Volunteer Day tomorrow? If you’re in Houston and looking for an organization worthy of your time, consider Amaanah Refuge Services, @amaanahservices, an organization dedicated to helping refugees find the resources they need on their path to becoming American citizens. We’ve volunteered with them in the past, and believe in the…

December 4, 2020

In a rare decision in favor of businesses, the Franchise Tax Board of the state of California declared that a business whose only connection to the state is due to remote workers complying with the Stay Home order issued on March 19, 2020, does not qualify as ‘doing business’ and is therefore not obligated to…

October 22, 2020
Legally Sound Smart Business cover art

Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
Apple Podcast badge
Google Podcast badge
Spotify Podcast badge

Latest Episodes

July 14, 2021

Through a five-round championship bout, Matt travels to Texas from California to determine which state is better for business. Will it be a knockout with a clear winner or will it go to the scorecards?

June 16, 2021

Covered in this episode of Legally Sound Smart Business are some typical business mistakes blunders small businesses often make and how to avoid them. Blunder #1: Copying and pasting agreements It may sound like a good idea at the time, but this blunder comes with hidden pitfalls. Having an attorney draft terms that are specific…

February 4, 2021

How you terminate an employee can make the difference between a graceful transition to avoidable negative outcomes like a dramatic exit or even a lawsuit. We gathered a panel of experts and asked them – is there a “right way” to fire an employee? We would like to thank our guests for this episode: Amr…

December 2, 2020

The COVID-19 pandemic has turned nearly every aspect of life on its head, and that certainly holds true for the business world. In this episode, Matt and Nasir explain how the early days of the pandemic felt like the Wild West and how the shifting legal playing field left a lot open to interpretation and…

November 16, 2020

After plenty of ups and downs, our buyer has finally closed on the purchase of their business. While we’re marking this down in the ‘wins’ column, it never hurts to review the game tape. In this final episode, our hosts, Matt Staub and Nasir Pasha, return to the deal almost a year later to reflect…

September 15, 2020

The ink is drying on the signature line and things are looking great for our buyer. After so much hard work, the finish line is in sight and the cheering within ear shot.   Though the landlord is still serving friction, things seem safe to move forward and for now, our buyer will be keeping…

July 31, 2020

Though things are coming along well, the journey would not be interesting if it was purely smooth sailing. After our buyer opens escrow, they are forced to push the closing date back when suddenly a letter from an attorney was received claiming the business, we are buying has a trade mark on the name!  Now…

June 12, 2020

With frustration at an all-time high and professionalism at an all-time low, our friend the Buyer has “had it” with the Seller and quite frankly their lack of knowledge. At present our Buyer is rightfully concerned that the latest misstep from our loose-lipped Seller will threaten not only the entire operation of the businesses but…

May 11, 2020

As we go deeper into the buying process, we start to uncover more challenges from our seller and encounter some of the wrenches they are tossing our way. When we last left off in episode three our team was knee deep in due diligence for our buyer, had already penned and signed the Letter of…

April 4, 2020

One word–interloper! When a new mysterious broker enters the transaction and starts to kick up dust, Nasir and Matt take the reins. The seller signed off on the letter of intent (see episode 2), yet this “business broker” serves only friction and challenges by refusing to send financials, whilst demanding more of a firm commitment…

April 4, 2020

Just as most stories and deals start out, everyone is optimistic, idealistic and full of hope for clear skies. It’s a perfect outlook with a perfect setup for the ups and downs yet to come. Peek further behind the curtain and into the first steps of buying a business: the letter of intent. After the…

April 4, 2020

When a savvy buyer hears opportunity knocking to purchase a prime positioned business, she decides not to go it alone and taps in the professionals to help navigate what could potentially be a fruitful acquisition. “Behind the Buy” is a truly rare and exclusive peak into the actual process, dangers, pitfalls and achievements, that can…

August 7, 2019

GrubHub is subject to two “matters of controversy” that have likely become common knowledge to business owners: “fake” orders and unfriendly microsites.

May 28, 2019

In this podcast episode, Matt and Nasir breakdown the legal issues of the subscription industry’s business on the internet. Resources A good 50-state survey for data breach notifications as of July 2018. California Auto-Renewal Law (July 2018) Privacy Policies Law by State Why Users of Ashley Madison May Not Sue for Data Breach [e210] Ultimate…

March 12, 2019

In recording this episode’s topic on the business buying process, Matt’s metaphor, in comparing the process to getting married probably went too far, but they do resemble one another. Listen to the episode for legal advice on buying a business.

December 3, 2018

Nasir and Matt return to discuss the different options available to companies looking to raise funds through general solicitation and crowdfunding. They discuss the rules associated with the various offerings under SEC regulations and state laws, as well as more informal arrangements. The two also discuss the intriguing story about a couple who raised over…

July 24, 2018

Flight Sim Labs, a software add-on creator for flight simulators, stepped into a PR disaster and possibly some substantial legal issues when it allegedly included a Trojan horse of sorts as malware to combat pirating of its $100 Airbus A320 software. The hidden test.exe file triggered anti-virus software for good reason as it was actually…

April 17, 2018

Attorneys Matt Staub and Nasir Pasha examine Mark Zuckerberg’s congressional hearings about the state of Facebook. The two also discuss Cambridge Analytica and the series of events that led to the congressional hearings, the former and current versions of Facebook’s Terms of Service, and how businesses should be handling data privacy. Full Podcast Transcript NASIR:…

March 10, 2018

The Trump presidency has led to a major increase in ICE immigration enforcement. It’s critical for business owners to both comply with and know their rights when it comes to an ICE audit or raid. Nasir, Matt, and Pasha Law attorney Karen McConville discuss how businesses can prepare for potential ICE action and how to…

February 5, 2018

New years always bring new laws. Effective January 1, 2018, California has made general contractors jointly liable for the unpaid wages, fringe benefits, and other benefit payments of a subcontractor. Nasir and Matt discuss who the new law applies to and how this affects all tiers in the general contractor-subcontractor relationship. Click here to learn…

January 2, 2018

With a seemingly endless amount of new mattress options becoming available, it is unsurprising that the market has become increasingly aggressive. As companies invest in more innovative solutions to get in front of customers, review sites, blogs and YouTube videos have moved to the forefront of how customers are deciding on their mattresses and how…

December 7, 2017

In recent months explosive amounts of high profile allegations of sexual harassment, assault, and varying acts of inappropriate behavior have transcended every sector of our professional world. With a deluge from Hollywood and politics, and the private workforce, accusations have inundated our feeds and mass media. This harassment watershed has not only been felt within…

November 16, 2017

If you are not familiar with the EB-5 program started in 1990 to give green cards to certain qualified investors in the United States, then you may not have been alone a few years ago. Currently, the EB-5 program has since exploded since its inception and now hits its quotas consistently each year. The program…

October 10, 2017

Government requests come in multiple forms. They can come in as requests for client information or even in the form of investigating your company or your employees. Requests for Client Information General Rule to Follow Without understanding the nuances of criminal and constitutional law and having to cite Supreme Court cases, any government requests for…

August 24, 2017

Nasir and Matt suit up to talk about everything pertaining to employee dress codes. They discuss the Federal laws that govern many rules for employers, as well as state specific nuances in California and other states. The two also emphasize the difficulty in identifyingreligious expression in dress and appearance, how gender-related dress codes have evolved…

June 28, 2017

Nasir and Matt discuss the life cycle of a negative online review. They talk about how businesses should properly respond, how to determine if the review is defamatory, the options available to seek removal of the review, how to identify anonymous reviewers, whether businesses can require clients to agree not to write negative reviews, and…

June 7, 2017

On this episode of the Ultimate Legal Breakdown, Nasir and Mattbreak down social media marketing withguests Tyler Sickmeyer and Kyle Weberof Fidelitas Development. They first discuss contests and promotionsand talk about where social media promotions can go wrong,when businesses are actually running an illegal lottery, and the importance of a soundterms and conditions. Next, they…

April 3, 2017

On this episode of the Ultimate Legal Breakdown, Nasir and Matt go in depth with the subscription box business. They discuss where subscription box companies have gone wrong(4:30), the importance of a specifically tailored terms and conditions(6:30), how to structure return policies (11:45), product liability concerns (14:45),the offensive and defensive side of intellectual property (19:00),…

February 1, 2017

Nasir and Matt discuss the suit against Apple that resultedfrom a car crashed caused by the use of FaceTime while driving. They also discuss howforeseeable use of apps can increase liability for companies. Full Podcast Transcript NASIR: Hi and welcome to Legally Sound Smart Business! I’m Nasir Pasha. MATT: And I’m Matt Staub. Two attorneys…

January 5, 2017

The guys kick in the new year by first discussing Cinnabon’s portrayal of Carrie Fisher as Princess Leia soon after her death, as well as other gaffes involving Prince and David Bowie. They alsotalk about right of publicity claims companies could be held liable for based on using someone’s name or likeness for commercial gain.

December 22, 2016

Nasir and Matt discuss the recent incidentat a Victoria’s Secret store where the store manager kicked out all black women after one black woman was caught shoplifting. They then each present dueling steps businesses should take when employees are accused of harassment.

December 8, 2016

Nasir and Matt return to talk about the different types of clients that may have outstanding invoices and how businesses can convert unpaid bills to getting paid.

November 10, 2016

After a long break, Nasir and Matt are back to discuss a Milwaukee frozen custard stand that is now revising it’s English only policy for employees. The guys also discuss how similar policies could be grounds for discrimination and what employers can do to revise their policies.

October 6, 2016

The guys discuss the new California law that allows actors to request the removal of their date of birth and birthdays on their IMDB page and why they think the law won’t last. They also discuss how age discrimination claims arise for business owner.

September 29, 2016

Nasir and Matt discuss the racial discrimination claims surroundingAirbnb and how it’s handled the situation. They also discuss some practical tips for businesses experiencing similar issues.

September 8, 2016

Nasir and Matt discuss whyAmazon seller accounts are getting suspended and banned without notice and how business owners can rectify this situation through a Corrective Action Plan.

August 25, 2016

Nasir and Matt talk about the accusations surroundingfashion giant Zararipping off the designs of independent artists like Tuesday Bassen and howsmaller companies can battle the industry giants.

August 18, 2016

Nasir and Matt discuss Brave Software’s ad replacing technology that has caught the eye of almost every national newspaper and has a potential copyright infringement claim looming. They also welcome digital marketing expert Matt Michaelree to speak on the specifics of what Brave is attempting to do and whether it has the answers moving forward.

July 28, 2016

Nasir and Matt discuss the sexual harassment lawsuit filed by Gretchen Carlson against Fox CEO Roger Ailes. They also talk aboutthe importance of sexual harassment training and properly handling such allegations in the office.

July 15, 2016

Nasir and Matt talk about the changes at Starbucks that have led to many disgruntled employees and customers.

June 23, 2016

Nasir and Matt discuss the criminal charges facing FedExinvolving the alleged transportation of illegal drugs. They also talk about how business owners should address working with customers that may be breaking the law.

June 15, 2016

The guys return after a long break to discuss why Yahoo is auctioning off over 3,000 patents and how this decision will affect the longevity of the company.

May 25, 2016

Nasir and Matt discuss the increase in the salary thresholdfor exempt employees and how employerscan try to avoid paying overtime as a result.

May 18, 2016

Nasir and Matt discuss the Baltimore law that makes it very difficult to operate food trucks in the city. They also discuss all the legal restrictions tohaving a food truck.

May 11, 2016

Matt listens to Nasir recap the developing battle in his hometown of Vandalia, Ohio over whether a Dunkin Donuts can move into a location in close proximity to a local favorite donut shop. They then discusswhether the issue is more legal or personal.

May 9, 2016

The guys kick off the week by discussing a Nevada employee who is claiming she was fired for not supporting the Scientology beliefs of her employer.

April 27, 2016

The guys discuss the massive floods in Houston,how employers responded, and why one meteorologist became a local hero. They also discuss the steps businesses should take in preparing for storms outside the workplace.

April 20, 2016

The guys discuss the boycott of Amazon over the products of an unnamed presidential candidate. They also talkabout how a business should handle a boycott and whether it’s possible to exit one unscathed.

April 13, 2016

Click here to read HubSpot’s response on this topic. Nasir and Matt discuss the trend in startups to compensate programmers and other early employees with stock options and how the company culture at HubSpot isn’t what it seems.

April 6, 2016

Nasir and Matt discuss various lawsuits against social media platforms in which users are accused of artificially inflating their social currency.

We represent businesses.
That’s all we do.

Oh, and we love it.

We love our work. We love reviewing that lease for your new location. We thrive on closing that acquisition that nearly fell through. We’re fulfilled when we structure a business to grow, raise capital, and be legally protected.

We focus on developing close relationships with our clients by being like business partners. A partner who provides essential, personalized, proactive legal support.

We do all of this without utilizing the traditional billable hour model. You pay for the value we bring, not the time spent on calls, emails, and meetings.

Our team is made up of attorneys and staff that share these values and we are retained by clients who want the same.

Pasha Law PC operates in the states of California, Illinois, New York, and Texas.

Meet Our Team

Fractional General Counsel Services

Pasha Law Select offers the expertise of a high-end general counsel legal team for every aspect of your business at a fixed monthly rate. Pasha Law Select is deliberately designed to allow our legal team to be proactive, to anticipate, and to be comprehensive in serving our clients. To be great lawyers, we need to know our clients. We can’t know our clients unless we represent a select number of clients in the long-term. This is Pasha Law Select.

Learn More