Actually, it is not breaking news; the right to recruit and hire your competitors’ employees has a long and well established history in California. So long as the recruiting efforts are not coupled with wrongful or illegal behavior, employers are free to target and hire employees from their competitors. But that lesson has seemingly been lost on many companies who threaten, and sometimes pursue, litigation against competitors in their industry as a way to discourage fair and lawful recruiting. In a decision released last week, the California Court of Appeal issued a scathing rebuke to a company, Cypress Semiconductor, who (in the court’s view) filed an “objectively specious” lawsuit against a competitor. Cypress abandoned the lawsuit on the eve of a motion to dismiss filed by the defendant, Maxim Integrated Products. Finding that the purpose of the suit “was to cow Maxim, and perhaps other competitors, into refraining from conduct” in which they had every right to engage, the Court of Appeal approved an order requiring Cypress to pay Maxim’s attorneys’ fees.
The case is clearly intended as a warning to employers who use litigation to bully competitors seeking to hire their employees. But it also highlights the tremendous benefits to be gained by making sure your recruiting efforts are fair and lawful. Those benefits vanish the second a recruiter, or the recruit, crosses the line into unlawful behavior, e.g., by removing materials or copying electronic files that belong to the prior employer. If your company hires employees from competitors from time to time, as most companies do, it is well worth the time and effort to implement recruiting and intake practices to ensure new employees do not bring their former employer’s documents and materials with them to their new job.