Drafting enforceable restrictions on recruiting employees

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Originally published in the Illinois State Bar Association -- Labor & Employment law in March 2012

Employment and business-to-business contracts often restrict soliciting or hiring a company’s employees for a time. Court decisions applying Illinois law recognize that maintaining a stable workforce is a legitimate business interest, but reject in most circumstances blanket restrictions on recruiting or hiring any employees for any business. For example, in Hay Group v. Bassik, 2005 U.S. Dist. LEXIS 22095 * 22, 2005 WL 2420415 * 7 (N.D. Ill. Sept. 29, 2005), the court refused to enforce an employment agreement’s restriction on “soliciting or otherwise directly or indirectly attempting to induce any employee of Hay Group, Inc. or its affiliates to terminate his or her employment.” Similarly in YCA, L.L.C. v. Berry, 2004 U.S. Dist. LEXIS 8129, 2004 WL 1093385 * 18 (N.D. Ill. May 7, 2004), while a recruitment restriction served a legitimate interest of protecting confidential information from potential competitors, it was overbroad because it prohibited recruiting or hiring any employee for any business.

The same standards apply in business-to business contracts. In Pactiv Corp v. Menasha Corp., 261 F.Supp. 2d 1009 (N.D. Ill. 2003), the parties signed a confidentiality agreement that governed the prospective buyer’s use of information that would be provided to it for evaluating the potential purchase of a Pactiv subsidiary. A clause in the agreement restricted the prospective buyer for three years from soliciting, hiring, or inducing any “management employees” to terminate employment. While acknowledging that Pactiv had a legitimate interest in preventing the potential purchaser from using its information and access to hire away personnel, the court held the restriction fatally overbroad. The restriction applied not just to the subsidiary, but also to all present and future management employees of Pactiv and its affiliates throughout the world, regardless of what knowledge they had concerning the subsidiary. 261 F. Supp. 2d at 1014-15.

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Published In: General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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