Is It Legal for Another Business to Steal Your Employee?

Alabama’s local economy depends to a large extent on its dynamic and fluid workforce. With the growing shortages of labor, the competition for top talent has become fierce. Proven high-performance employees are getting a lot of attractive offers from different competitors. This gives rise to a critical question of our times – is employee poaching legal?

The simple answer is that while there is no single law preventing employees from seeking lucrative opportunities, it is not entirely legal under certain circumstances. An experienced business law attorney in Alabama can help you assess your legal standing and determine whether your competitor was illegal in their approach to stealing your employees.

Non-Compete Agreements and Employee Raiding

The most clear-cut basis for potential liability is in the form of tortious interference when a competitor hires talent away from another company. Statutes governing employee non-compete agreements in Alabama were revamped in 2016. A new non-compete and non-solicitation statute was passed which repealed § 8-1-1 of the Alabama Code.

The New Act is not entirely clear on the subject of employee poaching but offers to regulate agreements that prevent the solicitation of a rival’s employees. Such agreements used to be considered partial restrictions of trade. Since 2016, non-solicitation agreements can be enforced to prevent the solicitation of any current employee by a departing employee if they hold a uniquely essential position to the management.

However, it is important to understand that the New Act has essentially left this as a gray area that is open to interpretation by the courts. Even where there is an absence of restrictive covenants in the form of non-compete agreements, the hiring company may face potential liability for raiding or poaching.

Claim for Misappropriation of Trade Secrets and Unfair Competition

Even without a non-compete agreement, the hiring competitor can always become a target for a misappropriation of trade secrets claim. These claims are governed under the Alabama Deceptive Trade Practices Act. Alabama statute section 8-19-1 provides for statutes governing unfair or deceptive trade practices.

There is also the potential exposure to unfair competition. The viability of such claims hinges on the numbers. For instance, you may not have a claim if the company hired one or two employees, but you may have a problem if the firm hired a large number of workers.

There is minimal exposure in 1 – 2 employees and you may not be able to prove unfair competition without the existence of trade secrets and non-compete agreements. However, in the case of a large exposure, the hiring company’s actions can be termed as unfair competition, even without trade secrets and non-compete agreements.

The Alabama Deceptive Trade Practices Act is a powerful weapon and can be difficult to defend against. A practice is termed unfair if it is unethical, immoral, unscrupulous, oppressive, or substantially injurious to consumers.

Potential Exposure for Tortious Interference

Employee poaching or raiding can become an issue for liability to the hiring company. Tortious interference is the most clear-cut theory of liability, especially in the case of employees that are subject to restrictive covenants. The company can be deemed to have tortuously interfered with:

• The employee contract
• Your customer relationships

The notion that the rival company tortiously interfered with your customer relationships arises from the fact that the employee they poached had access to a sensitive customer database. This can be proved to be in violation of the non-solicitation or non-compete agreement.

No-Poaching Agreements

Typically, a no-poaching agreement is a contract between an employee and employer that the employee is barred from hiring other employees for a particular period of time in the event the employee leaves their employment with the employer. These agreements are referred to as non-solicitation agreements or no-poaching agreements.

A variant of the agreements can exist between two businesses as well. A business bringing in an outside consultant for a particular project may agree to not directly hire the firm’s employees.

Federal Prosecution for Illegal Employee Raiding

The Fair Trade Commission Act prohibits “unfair or deceptive trade practices” and “unfair methods of competition.” 15 U.S.C. § 45(a)(1). The Sherman Antitrust Act prohibits any contract in “restraint of trade or commerce.” 15 U.S.C. § 1. The FTC and the DOJ are authorized to enforce these antitrust laws on a federal level.

In addition, the Supreme Court has held that any violation of the Sherman Act will be deemed as an automatic violation of the Fair Trade Commission Act. This means that the FTC can pursue those businesses that engage in unfair behavior which can seem to violate the Sherman Act and other trade practices.

It is important to note that Sherman Act violations can result in civil actions as well as criminal prosecutions. The FTC has the power to refer Sherman Act violations to the DOJ. Private plaintiffs injured by the antitrust violations are allowed to bring civil actions for compensation and damages.

Get Legal Representation from a Reputable Alabama Business Law Attorney

The employment law attorneys at Birmingham Law Group can review and bolster your contracts to ensure they offer maximum flexibility and protection to your organization. We realize the time and resources spent on building a team and we will provide the strong legal guidance necessary to ensure you get the favorable resolution you are looking for.

Schedule your free case review with our lawyers today. Call us at (205) 964-9764 or contact us online.