By: James B. Sherman, Esq.
Having pared down their workforces during the recession, some employers are once again looking for employees to hire. This is indeed good news for business and our country. However, as the economy creeps back toward what it once was, competition for good employees is also growing. To be blunt, many of the unemployed are comprised of those thought to be lesser performers who were unloaded as a consequence of the tough economy - they will not be sought out to fill new positions as they become available. Instead, many employers will look (as they usually do) to find the best possible candidates to hire and oftentimes those kinds of people will come from the ranks of the currently employed. Job hopping, aggressive recruiting and employee poaching are becoming more commonplace in this environment. Recent cases in Minnesota and elsewhere are illustrative of this point.
One recent case involved a corporate officer who solicited employees by telling them he hoped they would join him if he left and formed a competing business. Viking Produce, Inc. v. Northstar Produce, LLC, A09-377, 2010 WL 695817 (Minn. App. 2010) (unpublished). The Minnesota Court of Appeals allowed claims for breach of fiduciary duties against the officer to go forward, even though he had not signed a so-called "non-compete" agreement or agreed not to solicit employees. This is significant because it recognizes that all employees owe certain duties of loyalty to their employers, and those duties increase commensurately with position and status in the organization.
In another case, the employer struck out on its attempt to enforce a non-compete agreement against an employee it had hired prior to selling the business. The Court of Appeals held that the employer lacked standing to pursue the claims following the sale. Carlson v. Schmitt, A09-930, 2010 WL 607576 (Minn. App. 2010) (unpublished). It is always wise to include an "assignment" clause in any non-compete agreement or other restrictive covenant with an employee, whereby the terms can survive the sale, merger, etc. of the business. In more robust times, many employers who use non-compete agreements look the other way when an employee goes to work for a competitor. These are not those kind of times and hotly contested litigation over breaches of such agreements appears to be on the rise.
This phenomenon is not limited to any particular industry or region and has even found its way into the legal profession. Recently a New Jersey law firm settled an ugly attorney poaching lawsuit for $4.5 million. The defendant firm had hired 15 attorneys and 16 staff members, causing the plaintiff law firm to fold. The moral of the story, if there is one, is that in the potential frenzy to find good people as the economy hopefully continues to slowly recover, employers should be mindful of how they go about growing. As for employers looking to retain good employees, strong non-compete and other agreements are a good idea but, as is always the case, providing employees with a good place to work is paramount.
Questions? Please contact WS Shareholder and Senior Attorney James B. Sherman at (952) 746-1700, or jasherman@wesselssherman.com.
