Avoiding Claims of Tortious Interference with At-Will Employment
Recently,
the California Supreme Court unanimously ruled that a defendant may be held
liable under an intentional interference with the employment relationship theory
for inducing an at-will employee to quit working for the plaintiff if the
interference is accompanied by an independent act of wrongdoing. Reeves
v. Hanlon (Aug. 12, 2004) S114811, 2004 Cal. LEXIS 7239.
The
Supreme Court rejected the defendant's argument that it could never be a
tort to try and induce an at-will employee to leave his or her job since
the employee is free to leave whenever he or she wants.
The
Supreme Court ruled that an employer has the right to induce a competitor's
employee to leave; however the new employer cannot use illegal or wrongful
methods to do so.
Attorneys Left and Took Employees, Files and Clients with Them
The
case was brought by Robert L. Reeves and Associates (Reeves) against Hanlon
& Greene (H&G). Reeves employed Hanlon and Greene as attorneys in
the mid-1990's. In 1999, Hanlon and Greene both
resigned without notice or warning. Hanlon was apparently dissatisfied over
his small year-end bonus. Reeves had told him there were no profits to
share, while at the same time Reeves was buying a yacht and remodeling his
home.
In
the process of leaving, Hanlon and Greene persuaded Reeves' employees to
join H&G, encouraged dissatisfaction among Reeves' employees,
misappropriated trade secrets, destroyed computer files and data, and took
a company car. When they resigned, Hanlon and Green left no status reports
on existing matters. The evening of their resignation, Hanlon and Greene
personally solicited key employees.
Prior
to their departure, Hanlon and Greene accessed Reeves' computer database to
print out confidential client name, address, and phone number information.
Reeves and his bookkeeper testified that 155 clients left Reeves for
H&G following the split. Out of those, 147 failed to pay their
outstanding bills to Reeves.
The
trial court awarded $150,000 to Reeves in damages and nearly $50,000 in
costs. The $150,000 was based on unpaid bills from clients lost to H&G,
lost future business revenue, and recruiting replacement employees.
Tort Claim Allowed If Independently Wrongful Act
H&G
argued that under California
law an employer should not be held liable by virtue of the employer
offering employment to an at-will employee of another company.
H&G
relied on a previous court of appeal decision, GAB Business Services,
Inc. v. Lindsey & Newsom Claim Services, Inc. (2000) 83 Cal.App.4th
409. In GAB, the court held that an employer could not, as a matter
of law, maintain a cause of action for interference with its at-will
employment contracts. The case involved a lawsuit against a regional
vice-president who left for a competitor and recruited several of his
former company's at-will employees to come with him. The court in GAB
felt that allowing such suits would undermine California's strong public policy
supporting the mobility of employees.
The
Supreme Court rejected GAB's holding that
an employer may never maintain a cause of action against a competitor for
intentional interference with its at-will employment relations.
The
court held that inducing the termination of an at-will employment
relationship may lead to liability if the defendant engaged in an
independently wrongful act - - an act that violates some constitutional,
statutory, regulatory, common law, or other legal standard.
Justice
Marvin Baxter stated, "[e]mployers deserve
protection from other employers who engage in such wrongful conduct."
Justice Baxter said that allowing such suits respects "both the right
of at-will employees to pursue opportunities for economic betterment and
the right of employers to compete for talented workers." Moreover,
allowing such suits strikes "the proper balance between society's
interest in fostering robust competition in the job market and its interest
in protecting against unlawful methods of competition."
In
this instance, the court found that Hanlon and Greene's conduct justified
an award against them. They engaged in an unlawful and unethical campaign
to deliberately disrupt plaintiff's business. They deleted and destroyed
files, misappropriated confidential information, and improperly solicited
clients. Hanlon and Greene did more than simply extend offers to at-will
employees of another company; they "purposely engaged in unlawful acts
that crippled plaintiff's business operations."
What Employer Should Do?
Employers
who are recruiting employees from their former employer should never:
- Disparage or
defame the former employer.
- Violate
confidentiality or trade secret agreements of the prior employer. The
recruited employee should sign an agreement stating that he or she
will not violate the confidentiality agreement(s) of its previous
employer(s).
- Use confidential
information obtained while working for the prior employer to solicit
new employees, such as confidential salary information.
- Engage in
systematic inducement of employees from a competitor with the intent
to destroy the competitor.
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