Once again, the Court surprises me in a non-compete case
I recently learned of a case out of Eastern Virginia – Depuy Synthes Sales Inc. v. Jones – where employees of one medical device manufacturer (Depuy), left to join a competing company (Sky Surgical) and were quickly sued by their former employers.
In the lawsuit, it was alleged the employees violated their contracts, (non-compete and non-solicitation clauses) and that Sky Surgical, the new employer, was also liable to Depuy for tortuously interfering with Depuy’s contract with the employees.
While it is neither surprising to me that the old employer would file suit naming the new employer, it was surprising to me that the basis of the tortious interference claim was based on the interference of the employment contract — not some kind of third party contract with a customer.
Allow me to explain myself better.
Typically if Company B uses trade secrets or confidential information from Company A to go after Company A’s clients, Company A could allege tortious interference of business expectancy or contract, conspiracy and violation of Va. Trade Secret act. Meaning, you intended to harm us by using this information against us to get our clients.
It is a novel approach however, to allege the hiring of an employee with an existing contract is itself tortious interference of contract. The contract at issue is no longer the contract with the client – but the one with the former employee.
The federal court held however, that the lawsuit sufficiently plead allegations such that at least for now, Depuy could pursue this claim against Sky Surgical. The Court writes in relevant part,
Here…the contracts that Sky Surgical is alleged to have interfered with, the employment contracts between Plaintiff and Jones, and Plaintiff and Schools, include obligations (non-disclosure, non-solicitation, and non-competition) that apply for a period of eighteen months after the end of the employment relationship. Therefore, Jones and Schools could not terminate such contractual obligations “at will.” Stated differently, the complaint alleges that Sky Surgical owed a duty to Plaintiff not to interfere with Plaintiff’s non-terminable contracts with its employees/former employees, and that Sky Surgical’s violation of such duty constituted a tort under Virginia law. In light of the duty alleged, and the non-terminable nature of the contract clauses, by hiring them to compete and essentially asking they violate their contracts with their former employer.
I will admit this approach surprises me. I’ve never seen it. I am not sure I agree with the Court that Virginia law supports such a right of action. I am not sure that simply hiring an employee and inferring they should breach their contract and compete, is tortious interference with that contract.
Either way, it makes me nervous for future clients. Before, when someone left a company with a non-compete in hand, I would advise them their new employer could be named in a suit for conspiring, using trade secrets of their old employer, etc. I would encourage them to disclose the existence of the contract so the new company would know how to act appropriately.
Now, I have to advise them that hiring my client, and asking them to compete (and arguably breach their existing contract, valid or not) is actionable!
This is a huge shift for employees and frankly, for companies who hire individuals with restrictive covenants. One I will continue to monitor, and one that frankly just surprises me.