Navigating Employee Non-solicits When Recruiting Multiple Employees from a Single Employer | USA

Post-employment restrictive covenants can pose challenges in the successful recruitment of new employees. Those challenges may be amplified when recruiting multiple employees from a single employer, particularly when there are employee non-solicitation provisions. However, recent litigation trends in New York show that enforcing employee non-solicitation provisions presents its own difficulties, as there is a growing body of recent case law that construes narrowly the categories and circumstances of “legitimate” employer interests to be protected in the employee non-solicit context. Litigation risk may also be reduced by taking precautionary measures.

New York recognises post-employment restrictions preventing a departing employee from, for a fixed period, directly or indirectly soliciting, encouraging, or inducing other employees to leave the employer. The two main issues are (i) the enforceability of the non-solicitation clause and (ii) establishing solicitation by a party (eg, a previously recruited employee) bound to the agreement. 

Assuming there is solicitation (see below), courts will generally enforce an employee non-solicit to the extent it is “reasonable,” meaning the restraint:

Reasonableness depends on the specific facts of each situation including the position of the departing employee. BDO Seidman v Hirschberg, 93 N.Y.2d 382, 388-89 (1999).

On the important prong of “legitimate interest of the employer,” courts have recognised the protection of trade secrets, confidential customer information, client base, and unique or extraordinary employee services. QBE Americas, Inc. v Allen, 2022 WL 889838, at *10-11 (S.D.N.Y. March 25, 2022). Employer attempts to claim other legitimate interests have been rejected, including, notably, stabilisation of the employer’s workforce; costs associated with recruiting, hiring and training employees; and the prevention of co-ordinated en masse resignations by at-will employees. Permanens Cap. L.P. v Bruce, 2022 WL 3442270, at *9 (S.D.N.Y. July 22, 2022); In re Document Techs. Litig., 275 F. Supp. 3d 454, 466 (S.D.N.Y. 2017). Whether the continued employment of the person being recruited is a protectable and “legitimate interest” may also depend on whether the employee is employed at-will or for a fixed term. QBE Americas, Inc, 2022 WL 889838, at *11.

While recent cases have held that even en masse hiring from a competitor is not, on its own, sufficient grounds to enforce a non-solicitation provision, employers should still be mindful that New York courts will enforce non-solicits where legitimate interests are found, and that New York courts generally view non-solicits as more reasonable than non-competes. See, for example, Genesee Valley Trust Co. v Waterford Group, LLC, 130 A.D.3d 1555, 1158 (4th Dep’t 2015) (“A covenant not to solicit employees is inherently more reasonable and less restrictive than a covenant not to compete.”) (quotation marks and citations omitted); Renaissance Nutrition, Inc. v Jarrett, 2012 WL 42171, at *5 (W.D.N.Y. Jan. 9, 2012) (same). 

On the issue of solicitation, employers seeking to enforce a non-solicitation provision must produce evidence of solicitation by the departed employee (direct or indirect) as well as information about the employees being recruited, such as their duties, access to confidential information, and client relationships.

 As such, employers contemplating the recruitment of a group of employees may wish to consider precautionary measures in order to be able to present a compelling case that no improper solicitation took place. These include the following: 

Although no amount of precautionary measures can prevent claims by former employers of breach of employee non-solicit provisions, combining these steps with practical knowledge of the circumstances under which a court will enforce these restrictive covenants can better position employers to defend such claims when they arise.