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Banking on your executive’s compliance with the trade secrets law

Feb 08, 2015
  • Ask the attorney

Q. I own a mid-sized company and we are interviewing a Sales VP from a competitor. This guy knows everyone in our field and the particular needs and pricing for all of our major customers. My golfing buddy says we can get into trouble if we go ahead. Is he nuts?

A. Your buddy is anything but nuts!

While you can certainly hire the former employee of a competitor, you need to be aware that there are potential legal issues that need to be addressed. Failure to do so can result in the involvement in litigation of both your company and your new employee. You need to determine whether the former employee is subject to post-employment restrictions such as a non-compete agreement or a non-solicitation agreement and, if so, to evaluate the scope and enforceability of such restrictions. It is advisable to obtain written confirmation of the inapplicability of such agreements from the new employee.

You also need to evaluate whether the new job position will pose a substantial risk of misuse of the former employer’s trade secrets. A former employee cannot be restrained from using his or her general knowledge, skills or experience but a former employee can be enjoined from use of the former employer’s trade secrets which can encompass technical and non-technical information such as customer lists, purchasing requirements and pricing information. Among other considerations, the employee should be strongly advised not to download such materials to a flash drive or via e-mail and not to take paper versions.

These issues should be reviewed by counsel when the new employer is in direct competition with the former employer. Each case is different and requires a review of all the facts. Our Intellectual Property and Litigation Partners can provide customized, pro-active advice to minimize the risks in these hiring situations.

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