March 2015
By: James B. Sherman,
Esq.
In
Minnesota and elsewhere, employers who hire an applicant whom they know has a
noncompete agreement with a former employer often find themselves defending a
lawsuit alleging “tortious interference” with that agreement. A claim of
tortious interference essentially alleges that the hiring employer caused
a former employee to breach his or her noncompete agreement by offering a job in
conflict with its restrictions. Because it is an intentional tort this type of
claim rests on the fact that the hiring employer knew about the
applicant’s agreement with the former employer, but nevertheless chose to hire
the applicant in violation of the noncompete. A typical defense to a claim of
tortious interference is for the hiring employer to prove that the
noncompetition agreement is either not being breached, or is unenforceable for
any number of reasons. A recent decision of the Minnesota Supreme Court, issued
on March 4, 2015 in the case of Sysdyne Corp. v. Rousslang, et al., has added
another potential defense to claims of tortious interference. An oversimplification of this new defense
might be articulated as: “My lawyer said it was okay to hire this applicant.”
Okay,
so the defense articulated by the court in Sysdyne was considerably more
complex and laden with legalese than the above, but it did hinge on the hiring
employer’s reliance on the advice, albeit erroneous legal advice, of its lawyer
who had advised that the applicant’s noncompete agreement with his former
employer was poorly drafted and thus unenforceable.
The
defense articulated by the court in Sysdyne was not without limitations.
At the outset, any reliance on the advice of counsel must be “reasonable” under
the circumstances. In discussing what
may be reasonable the court referred to its previous decision in the case of Kallok
v. Medtronic, Inc. There, the hiring employer was found liable for tortious
interference – and liable for Medtronic’s legal fees in addition to its own –
because it did not “candidly provide its attorneys with all relevant
information.” In that case the defendant never told its lawyers details about
the applicant’s position and responsibilities as an employee at Medtronic, nor
of his access to confidential information. Quoting Kallok, the court in Sysdyne
Corp. stated that hiring employers “may not rely upon an infirm
consultation with counsel” to justify hiring an applicant in violation of a
noncompete agreement.
So
what can Minnesota employers take from the new Supreme Court decision in Sysdyne?
1.
Don’t
hire applicants who have noncompete or other restrictive employment agreements
(non-solicitation, confidentiality, etc.) with former employers without a good
faith assessment of the agreement to determine whether doing so might expose
your company to a claim of tortious interference.
2.
Don’t
listen to off-the-cuff opinions (even from lawyers) that noncompete agreements
are not enforceable; oftentimes they are enforced in court.
3. Do
consult with an experienced employment attorney who is well versed in the law
of noncompete and other restrictive agreements.
However, a legal opinion will be useless unless it is grounded in a
reasonable investigation of all relevant facts. At a minimum this includes
information about the applicant’s former position and duties with his or her
former employer, measured against those of the new position with the hiring
employer.
Getting
a legal opinion before hiring someone with a noncompete or other restrictive
employment agreement is highly recommended and can avoid costly litigation. Now, thanks to the Minnesota Supreme Court’s
recent decision in Sysdyne, a legal opinion (even one that may turn out
to be wrong) can also potentially provide a viable defense to claims of
tortious interference if you do hire the applicant.
_____________________________________________________________________________________
The
author, James Sherman, is licensed to practice and has drafted and enforced
noncompete and similar agreements in Minnesota, Wisconsin and Illinois for over
20 years. He also reviews these agreements and counsels employers who are
considering an applicant with these sorts of restrictions with a former
employer. Contact Mr. Sherman with questions at (952) 746-1700 or email jasherman@wesselssherman.com.
