Predatory Hiring

A landmark case in 1997 established another circumstance in which a company might have legal recourse to stop its employees from being hired away. While retailer Montgomery Ward was in the throes of bankruptcy, rival Sears Roebuck set out to hire away its managers. That's in accord with long-standing business practice. But when Ward sued, its attorneys uncovered in-ternal e-mail circulated among Sears employees plotting to "put them out of their misery" by hiring away key Ward managers. The court ruled that one company may not hire away employees of another company with the intent of crippling that company.

Pasek describes a case involving a client of his whose start-up business was on the verge of becoming a serious competitor of a rival company. "To prevent that, they hired away the key employee," he says. "It set [my client] back six months." The legal challenge will be to prove predatory intent.

In another case, Pasek says, a company suffering serious decline had one prosperous division. An outside company conspired with the division's vice president of marketing and some of its sales reps to recruit other employees, jump ship and start their own company. High-tech sleuthing uncovered a chain of e-mail and voice-mail messages showing that the employees had breached their duty of loyalty to their employer, and the outside company would likely lose a lawsuit over tortious interference with a contractual relationship. Both the insiders and the outside company settled with the employer for a significant sum of money.

"All businesses have to worry about whether they're hiring a lawsuit," Pasek says. He describes a client that hired a sales rep who brought boxes of sales records with him. He didn't use them, but the former employer found out and sued. Accordingly, if you're hiring, ask whether there's a non-compete agreement, and if so, what the terms are. Ask the new employee not to bring along confidential information. If new employees are likely to know so much that they'll inevitably disclose or use something confidential, consider putting them in a non-competing division.

Employees are your most important asset, so do your best to retain them through fair treatment rather than fear. When you hire new ones, make sure they don't come in dragging lawsuits behind them.

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This article was originally published in the September 2000 print edition of Entrepreneur with the headline: RA-A-A-ID!.

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