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A recent decision from the North Carolina
Court of Appeals illustrates the risk of hiring a competitor's employee
who has signed a non-compete agreement with the competitor, and the
value of taking precautions to avoid or reduce this risk.
In White vs. Cross Sales & Engineering,
the plaintiff, Kathleen White, was a sales representative for Cross
Sales & Engineering who had signed a non-compete agreement upon taking
her job with Cross. Her non-compete agreement also prohibited her from
using or disclosing any of Cross's trade secrets or other confidential
information. She resigned her job with Cross and in an exit interview
declined to tell Cross where she was going to work. When Cross
specifically asked White if she would be going to work for Control
Corporation of America, a competitor of Cross, she refused to answer.
Cross reminded her of the non-compete agreement she signed and told her
it would enforce the agreement if she went to work for CCA. In
addition, upon her departure from its employment, Cross sent White a
letter with a copy of her non-compete agreement and advised her to
comply with the agreement and inform her new employer of its existence.
After leaving Cross, White became employed
with CCA as a sales manager, and Cross's president sent a letter to
CCA's president, copied to White, asserting that she was in violation of
her non-compete agreement and requesting CCA's assistance in resolving
the matter as soon as possible. Neither CCA nor White responded to this
letter. Subsequently, Cross's counsel sent another letter to CCA and
White asserting that CCA was employing White with knowledge that she was
violating her non-compete agreement with Cross, that White was
soliciting customers whom she had served while with Cross, and that in
one instance she had solicited a customer without telling the customer
she had changed employers. Cross's counsel also asserted in this letter
that White inevitably would use and disclose Cross's trade secrets and
other confidential information in performing sales duties for CCA, and
warned that Cross would sue if the unlawful activities did not cease.
Again, neither CCA nor White responded to
this additional letter. Cross sued CCA and White, and CCA terminated
White's employment one week later because of the lawsuit and her
non-compete agreement with Cross. Subsequently, White sued CCA for
wrongful termination and also sued Cross for tortious interference with
contract, namely, interfering with her employment contract with CCA.
White settled her lawsuit with CCA, and the issue before the North
Carolina Court of Appeals in this recent decision was whether she could
proceed with her claim against Cross for tortious interference with her
employment contract with CCA.
The Court of Appeals affirmed a summary
judgment in favor of Cross and dismissed White's claim, finding that
Cross had not intentionally induced CCA to terminate White's employment
but had sought only to protect and enforce its own contractual and legal
rights. The Court concluded that CCA made the decision to fire White
on its own without ever conferring or even communicating with Cross
about the dispute, and that Cross did not provide an incentive to CCA or
"dangle a carrot" for CCA as an inducement to fire White but instead
threatened to use a "stick" in the form of a lawsuit.
This recent decision from the Court of
Appeals illustrates the importance of taking precautions when recruiting
or hiring a competitor's employee. A potential new employer should find
out whether a candidate has signed a non-compete agreement or similar
agreement with a current or former employer, and, if so, should consult
with employment counsel to determine whether the agreement prohibits the
candidate from performing the new job or calls for certain restrictions
on the candidate’s job duties if he or she is hired. If hiring the
candidate seems possible, the new employer should instruct the candidate
that he or she must return, and not retain, any materials containing the
current or former employer's trade secrets or other confidential or
proprietary information before starting the new job. If the current or
former employer gives notice of any concerns or asserts any claims, the
new employer should consult with employment counsel and respond to such
concerns or claims in a timely fashion.
For questions regarding this Alert or
other employment matters, or assistance with matters involving departing
employees, contact Louis Meyer
at lmeyer@poynerspruill.com
or ph. 919.783.2810, or
Susie Gibbons at
sgibbons@poynerspruill.com or ph. 919.783.2813.
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