Mr. Weber

Hospitality Law

When Hiring From Your Competitors

Remember to...

By Steven D. Weber, Founder, Weber Law, P.A.

There is a growing shortage of qualified and skilled hospitality employees. This shortage may lead hospitality brands to hire from competitors. While the idea of hiring a skilled employee with access to a competitor's information may be tempting, hiring from a competitor may have negative repercussions for the employee, the employer, and for the hospitality brand that is hiring them. To mitigate the risk of such a repercussion, a hospitality brand may wish to consider the below when hiring from a competitor.

When an employee leaves an employer, they may take information with them that they obtained during the course of their employment, either inadvertently or intentionally. Some of that information may be information that the employee's former employer desires to keep confidential, and out of a subsequent employer's hands. Examples of such information may include pricing strategies, business relationships, marketing strategies, and customer information. To protect such information from disclosure and to mitigate the risk of competition by a departing employee, employers may utilize, among other things, employment agreements, restrictive covenants, non-competition agreements, non-solicitation agreements, confidentiality agreements, policy manuals, and physical and electronic security. Some of these measures, like a non-competition agreement, may extend beyond the term of the employee's employment, and may include restrictions on the geographic location that a departing employee may seek subsequent employment in and on what capacity an employee may operate.

Hiring a competitor's employee may be a tantalizing proposition, but a hospitality brand cannot ignore the potential repercussions of doing so. Those repercussions may involve a lawsuit alleging breach of any of the applicable employment restrictions mentioned above, tortious interference with the employer's relationship with the employee, or other allegations and claims. Developing a strategy regarding hiring employees from competitors, or from anyone else who has information that they are likely to seek to protect from a departing employee, may mitigate the potential negative repercussions associated with hiring such an employee.

Identifying candidates who work for a competitor or a sophisticated employer may be a good first step in the process of mitigating potential repercussions. This process should begin before the hospitality organization communicates with a candidate. Depending on the candidate's role at the competitor, it may be likely that the candidate had access to information that the competitor may contend is a trade secret, is confidential, proprietary, or would give another a competitive advantage if they were able to utilize that information with their new employer. Additionally, a large employer, with access to sophisticated counsel, is more likely to utilize measures that limit the ability of an employee to compete against their former employer or utilize information obtained during their employment. Identifying and comprehending the significance of the candidate's current or past employer is thus an essential first step. From that information, a hospitality brand may be able to determine what measures are, or have been, employed by a particular competitor by simply having their own counsel research any lawsuits involving that competitor and a former employee.

It is possible that litigation involving that competitor may detail at least some of the protective measures that competitor used in the past. Identifying any such litigation may also provide a window into the competitor's appetite for enforcing any applicable restrictions. In this way, identifying a candidate's current or past employer as a competitor and understanding that competitor's protection practices, to the extent possible, may be a good first step to mitigating the risk of hiring someone with agreements in place that may cause negative repercussions down the road.

Effective due diligence will be a critical component for mitigating the risk of negative repercussions associated with hiring an employee of a competitor or from any other source. As previously mentioned, that due diligence process may begin even before a hospitality organization begins to communicate with a candidate. If a hospitality brand desires to communicate with certain candidates, a hospitality brand may wish to inform the candidates, in advance of any communications, that they must be aware of the existence of and scope of any non-compete agreements, confidentiality agreements, or other restrictive covenants.

The hospitality brand may also require that those candidates who are parties to a restrictive covenant to seek the advice of their own independent counsel regarding their existence and scope prior to any meeting with the hospitality organization. Doing so may allow a hospitality brand to avoid any obstacles that may arise later when the hospitality brand generally inquires into whether the candidate has signed a restrictive covenant and the terms of that restrictive covenant. Upon such an inquiry and any discussions with the candidate, it is important that the hospitality brand not encourage the employee to breach the terms of any such restrictive agreement during an interview or at an any point of the hiring process. Requiring that an employee review any applicable agreements with their own counsel prior to any discussions with the candidate may mitigate the risk of doing so. Furthermore, it is possible that not taking the above steps, or other steps, to prevent a breach of any applicable agreements, and not asking about restrictive covenants during the hiring process, may be evidence that the organization improperly encouraged the employee to breach that any such agreement, which may add to any potential repercussions.

Even if a hospitality organization requests that an employee disclose any applicable restrictive covenants or other agreements, the employee may deny or not acknowledge their existence. An employee may not want to disclose the existence of any such agreement under the belief that it will hurt their chances of being hired. Should the candidate deny the existence of an applicable agreement, an employer should do its own research into whether that type of employer has used non-competes or restrictive covenants in the past. For this reason, effective due diligence before and during the hiring process conversation is essential to mitigating the risk of any potential repercussions.

Upon learning that a candidate does have a restrictive covenant or similar agreement, the employer should take steps to determine what is its scope. Doing so may require inspecting any agreement in advance of speaking with the candidate, assuming the agreement itself is not confidential, and having legal counsel present during the hiring process. Engaging legal counsel to review any agreement's terms may also be crucial to determining to what extent and what information can be shared if the hospitality organization ultimately hires the employee from the competitor. Secondly, reviewing such terms will enable the hospitality organization to determine whether it makes business sense to hire a candidate based on the restrictions set forth within. If the candidate cannot contribute to the organization in an effective manner and in the time-frame that is necessary, that may end the inquiry into whether the candidate is appropriate for employment.

Upon seeking to hire any candidate that does have a restrictive covenant, the employer should take all possible steps to insure that they do not run afoul of the agreement's terms. Such measure may include but are not limited to structuring the candidate's offer letter and any policy manuals for that purpose. An offer letter to an employee with a restrictive covenant, and even without a restrictive covenant that has been identified, may reinforce and require that the employee should not breach any such agreement, if it does exist, or improperly use any information that falls under its scope. Handbooks and policies at the employer's workplace may further reinforce those objectives and state that an employee may not use any information restricted by any effective restrictive covenants.

As part of the due diligence process, it is inevitable that a hospitality organization will encounter a candidate that is a party to a restrictive covenant. Ultimately, a hospitality organization must weigh the costs and benefits of hiring any such employee from a competitor. On one hand, a competitor's employee may have access to a variety of information that could be a game changer for the hiring organization. However, much of that information may be off-limits. Even if a restrictive covenant or other agreement can be worked around, a competitor may file a lawsuit alleging a breach of the agreement even if the hiring hospitality organization does not believe it has violated the restrictive covenant. Defending against such a lawsuit, and winning can be as costly as can hiring an employee only to lose a lawsuit and discover the employee cannot be effectively utilized.

To mitigate the risk associated with hiring such an employee, a hospitality organization may wish to reach out to the competitor even before hiring the employee and discuss options that will allow them to hire the employee while maintaining the confidentiality required by the competitor. Should the parties be unable to reach an agreement, then the hospitality brand should weigh its options on how to proceed, including but not limited to commencing a declaratory action in a court to determine the validity or scope of any restrictive covenant. The hospitality organization may also seek to put the employee outside the geographic terms of the non-compete or in a position that they are outside the scope of what is permissible.

Hiring an employee from a competitor can yield a skilled and qualified employee, but it can also yield negative repercussions. Prior to hiring any such employee, a hospitality organization should consider taking steps to mitigate the risk of those negative repercussions by developing a plan that contains steps like the ones described above.

Steven Weber, founder of Weber Law, P.A., began in New York as an attorney for one of the world’s largest public law offices. Mr. Weber‘s clients ranged from elected officials to government agencies with budgets of over $1 billion. After transitioning to private practice with law firms in New York and Florida, he successfully aided individuals, management of private companies, and even other counsel through numerous public and private scenarios. Mr. Weber ultimately founded Weber Law to provide clients with exceptional levels of legal services and customer service. He has received the highest rating possible from Martindale Hubbell and has been named a Rising Star by Florida Super Lawyers. Mr. Weber can be contacted at 305-377-8788 or sweber@weberlawpa.com Please visit http://www.weberlawpa.com for more information. Extended Bio...

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