Business owners need to be aware about tort and defamation removal law because internet has massively affected many professional and personal areas of life. Today, let’s discuss interference tort associated with non-compete agreements.
Employers need to hire new employees, but due to competition and survival factor they make sign the non-competition agreements. These agreements generally come into effect, when the employer-employee relationship ends.
Non-competition agreements are crucial for different reasons like confidentiality and protection of trade secrets. In this agreement, the employee approves not to share the information learnt, while they were employed with their new employer, who is a competitor.
In employment scenario, employers can bring claim of tortious interference against the competitor’s, who deliberately poach their employees and the employee is responsible for breach of contract.
Element needed to prove tort of interference in relation with non-compete agreement
- Contract existence
- Wrongdoer’s knowledge about the existence of contract
- Wrongdoers deliberate intention to breach the contract
- Lack of justification
- Damages caused
Courts disapprove non-competition agreement because these are very restrictive. It limits the employee’s right of earning. However, both employee and the new employer can defend under reasons like fair competition.
Fair competition arguments
New employer can apply fair competition as privilege to combat tort of interference claim against non-compete agreement. Elements needed by the new employer for getting fair competition privilege –
- No wrongful means are used to obtain the breach.
- New employees act does not produce or persist an illegal restraint of trade.
- New employee’s purpose is to participate in competition with other employers.
Fair competition means, if an employee finds an advertisement that can boost his career and applies for it. He is regarded as the best candidate by the competitor then it is fair to hire the employee. However, the new employee will be liable for breach of contract and new employer will face tort of interference. The employee can get protection under fair competition defense, but the competitor will need to prove fair competition. Thus, the jury will not examine the new employer’s lack of justification to hire an employee violating non-compete agreement.
What is improper interference?
Courts consider the following to determine improper interference
- Nature of competitor’s conduct
- Former employers interest, which gets interfered with competitor’s conduct
- What interest competitor seeks?
- How directly the competitor interfered?
- Social interest to protect competitors right to action and former employers contractual rights
- Competitors proximity or remoteness to interference
Improper interference means enticing employees to violate their non-compete agreement for illegal purpose like obtaining their former employers business secret. Wrong assurances that non-compete agreement are not legally enforceable is also termed as improper interference.
In some states, former employer cannot sue the new employer under interference tort associated with non-compete agreement under certain scenarios. For example, when an employee is under 5-year non-compete contract and gets hired by a competitor.
The court will possibly declare non-compete agreement to be enforceable for just three years, thus the competitor will not be responsible for interference.
Deliberate interference with potential contractual relationship occurs when a potential customer’s account was prospected for the former employer but the employee brought them to his new employer.
Competitor is responsible for interference but employee is also liable. In this scenario, there is no issue with non-compete agreement but the competitor is responsible for interference tort of prospective contract. Plaintiff can recover lost profits expected.