How can companies protect themselves from legal disputes when the ‘perfect’ candidate is still covered by a non-compete?
Considering the news of a tight labour market and talent shortage in Singapore, it’s no wonder that companies might start looking at their competitors to recruit new hires.
But what if the candidate you are eyeing is burdened by a non-compete? What steps can you take to legally protect both your company and the new hire?
“The first step would be to examine whether or not the candidate’s new role falls within the scope of the non-compete,” said Shaun Lee, supervising associate at JWS Asia Law Corporation.
“Alternatively, assuming that the employee’s new start date is within the period of the non-compete, the restraint may be inapplicable because the new hire’s role is in a jurisdiction or location that is not covered by the terms of the non-compete.”
He also stated that an employer could always consent to its former employee joining a competitor and noted that some non-competes even expressly “contain a proviso which allows the former employee to join a competing company if the former employer’s consent is obtained”.
Suffice to say, it is important that both the employer and the candidate fully understand the elements governing the non-compete.
“As part of their legal and risk assessment, HR would need to investigate and closely consider how much overlap there is between the new hire’s previous and proposed job scope,” he said.
“This would include a review of the type of clients, the sectors in which those clients were in as well as the jurisdictions in which the new hire had previously worked in or had serviced clients in.”
Lee strongly advised companies to seek legal counsel given this scenario as hiring an employee with a valid and enforceable non-compete is clearly a breach of contract and companies could find themselves dragged into proceedings “between its competitor and its new hire on the basis that the company had induced or procured the new hire to breach his non-compete”.
Non-competes are also often used as a proxy method to prevent employees using their former employer’s confidential information, he said, and companies could potentially find themselves further embroiled in a dispute over misuse of this information.
“HR should consider the risk of the inadvertent misuse of confidential information,” he said, adding that the most prudent course to take is still to let the employee’s non-compete ‘run out’.
Related stories:
Ask a lawyer: Does HR have other legal means to prevent poaching?
Can you legally terminate an employee for committing a ‘minor’ mistake?
Ask a lawyer: Can I rescind a job offer following a background check?
But what if the candidate you are eyeing is burdened by a non-compete? What steps can you take to legally protect both your company and the new hire?
“The first step would be to examine whether or not the candidate’s new role falls within the scope of the non-compete,” said Shaun Lee, supervising associate at JWS Asia Law Corporation.
“Alternatively, assuming that the employee’s new start date is within the period of the non-compete, the restraint may be inapplicable because the new hire’s role is in a jurisdiction or location that is not covered by the terms of the non-compete.”
He also stated that an employer could always consent to its former employee joining a competitor and noted that some non-competes even expressly “contain a proviso which allows the former employee to join a competing company if the former employer’s consent is obtained”.
Suffice to say, it is important that both the employer and the candidate fully understand the elements governing the non-compete.
“As part of their legal and risk assessment, HR would need to investigate and closely consider how much overlap there is between the new hire’s previous and proposed job scope,” he said.
“This would include a review of the type of clients, the sectors in which those clients were in as well as the jurisdictions in which the new hire had previously worked in or had serviced clients in.”
Lee strongly advised companies to seek legal counsel given this scenario as hiring an employee with a valid and enforceable non-compete is clearly a breach of contract and companies could find themselves dragged into proceedings “between its competitor and its new hire on the basis that the company had induced or procured the new hire to breach his non-compete”.
Non-competes are also often used as a proxy method to prevent employees using their former employer’s confidential information, he said, and companies could potentially find themselves further embroiled in a dispute over misuse of this information.
“HR should consider the risk of the inadvertent misuse of confidential information,” he said, adding that the most prudent course to take is still to let the employee’s non-compete ‘run out’.
Related stories:
Ask a lawyer: Does HR have other legal means to prevent poaching?
Can you legally terminate an employee for committing a ‘minor’ mistake?
Ask a lawyer: Can I rescind a job offer following a background check?
