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When a group of employees is recruited from one company to join another, how many is too many?
Jeffrey
R.
Teeters
We are hearing more often of businesses trying to recruit multiple employees from the same competitor to start a new division, staff a new office, or significantly bolster sales. As with many human resources issues, the more people that are involved with a problem, the more problems the people are involved with. In short, the recruitment of a large group of employees from a single company raises additional risks, and a higher likelihood that the target company will feel compelled to fight back.
In most circumstances, at-will employees are free to resign their employment. However, when several employees at the same company coincidentally (or not so coincidentally) happen to make the same decision at the same time, the phrases “employee raiding” and “predatory hiring” start to be thrown around.
Very few courts have directly addressed the question, and the available court decisions are not consistent from state to state. Where the employees have non-competition, non-solicitation, or non-disclosure agreements, those contracts usually provide the critical grounds for determining the appropriateness of multiple hires. Those agreements will frequently prohibit employment with a competitor. Often times, when there is a mass resignation, someone on the “inside” helps convince the others to make the move. That action too may be directly addressed by the employees’ non-competition or non-solicitation agreements. Therefore, the now-common non-compete/non-solicitation agreement will be the first place to look for assessing the outcome when several employees simultaneously move from one competitor to another.
In the absence of such non-competition agreements, however, several other legal theories may still come into play. For example, a person’s actions while still employed might be subject to a fiduciary duty not to harm his or her current employer by rounding up colleagues for a mass exit, delaying business in hopes of grabbing sales after moving firms, or copying and using the employer’s confidential business information to set up or jump start the competing enterprise.
When courts have determined that a mass hiring from a single competitor is inappropriate, the common thread appears to be focused on the hiring company’s motives. In other words, legal problems are more likely to arise when deception and misrepresentation are involved, the “new” employer is attempting to cripple a competitor’s business or a particular division or office, or when the group hiring is designed to obtain the competitor’s trade secrets.
Assessing motives in an area where a judge is deciding what is fair and reasonable does not make for a predictable outcome. However, it is safe to say that the more people (and motivations) involved, the higher the risk that someone will cry foul.