A defendant company was unaware, when it hired two individuals, that they had entered into non-competition agreements with their prior employer. As a result, according to a Florida federal court, the prior employer did not have a valid cause of action against the new employer for intentionally interfering with those non-compete obligations.
Summary of the Case
During their employment by Aerotek, a recruiting company, Zahn and Jiminez signed non-compete covenants. Shortly after termination of their Aerotek employment, they allegedly violated the covenants by going to work for that company’s competitor C-T. Aerotek sued C-T for tortious interference with contract. C-T responded by moving to dismiss on the ground that it did not know about the covenants when it hired the two ex-Aerotek employees. The motion was granted. Aerotek, Inc. v. Zahn, Case No. 6:14-cv-293-orl-31TBS (M.D. Fla., 6/17/14).
The Court’s Rationale
The court reasoned that to state a claim for tortious interference, Aerotek was required to prove that C-T intentionally interfered with Zahn’s and Jiminez’s covenants at the time they supposedly committed a breach of contract. However, the court said, the employees breached when C-T hired them, and that occurred several months before C-T learned about the covenants. At that time, CT lacked the requisite intent to interfere with the contracts. What occurred thereafter may have been a continuation of injuries and damage, but it was not a continuing tort. In the court’s words, Aerotek “conflates the moment of the breach with the period of the injury.”
The court relied on a case concerning the date the statute of limitations began to run on a trade secret misappropriation claim against the new employer who allegedly received the former employer’s confidential information from a new hire. The ruling there was that the misappropriation occurred the day the ex-employee started working for the new employer. What occurred later were the effects of that one act, not a continuing tort.
The ruling in Aerotek, if generally followed, seemingly would provide some cover for an employer ignorant with regard to its hires’ non-compete covenants. Vaguely reminiscent of the military’s former “don’t-ask-don’t-tell” policy, on its face Aerotek suggests that the new employer may benefit from not questioning a new hire concerning the existence of a non-compete with a prior employer. But the strategic decision by the new employer not to seek that information before making a job offer, and not to assess the risks before investing time and money in the new hire, can be perilous if the new hire did promise not to compete.
First, even if the former employer does not sue its successor, the former employer may file a complaint against the new hire for torts and breach of contract. Any such lawsuit almost certainly will be distracting to both the new hire and the new employer, and will be expensive for one or both. Second, a court order might be entered enjoining the new hire from competing, which could result in an inability (at least temporarily) to perform all or part of the job for which he or she was employed.
Third, the prior employer may make claims against the new employer which are held to state valid causes of action. If tortious interference is alleged, the court might not follow the lead of the Aerotek judge and dismiss the allegations. Moreover, the complaint may allege misconduct other than or in addition to tortious interference. Fourth, if a lawsuit is filed against the new employer and/or the new hire, bad publicity may result regardless of the outcome in court. The better course usually will be to inquire sooner rather than later regarding non-compete obligations that a prospective hire may have.