There aren’t a lot of employers asking this question of job candidates. But after a recent million-dollar lawsuit, employers may want to consider doing so.
The question: Did you sign a non-compete agreement with your last employer?
The reason to consider asking it: As it turns out, yes, you can be sued by a new hire’s former employer if A) the person breaks his or her non-compete, and B) you knew or reasonably should’ve known about it.
(Note: If you’re in an industry in which a lot of non-competes are signed, it may not be hard for another employer to prove you “reasonably should’ve known” about a non-compete.)
Employer taken to the cleaners
Medical device manufacturer Biosense Webster has to shell out $1.2M following a lawsuit brought on by the fact that it knowingly hired an individual who’d signed a non-compete with his former employer and had to break that covenant when he went to work for Biosense.
Meet Jose de Castro, who at the start of this story worked for one of Biosense’s competitors St. Jude Medical.
de Castro sold medical devices for St. Jude and was recruited by Biosense to sell similar products — and to similar customers.
At the time de Castro was under a three-year non-compete agreement he’d signed with St. Jude.
Biosense knew this but told de Castro that for a number of technical reasons it believed the non-compete was unenforceable. As a result, Biosense told de Castro that if he took the job at Biosense, it would provide him with a legal defense should St. Jude try to enforce the non-compete.
de Castro then left St. Jude for Biosense. Immediately after, St. Jude sued Biosense.
St. Jude claimed that Biosense was liable because it deliberately interfered with the non-compete.
Biosense tried to fight the suit by claiming — again, for technical reasons — the non-compete was invalid.
A U.S. district court disagreed with Biosense and upheld the non-compete. It then ruled Biosense was guilty of willful interference and ordered it to pay St. Jude $47,680 to cover the costs associated with replacing de Castro. It also had to pay St. Jude $550,952 in lost profits.
And in a final blow, the court also ruled that Biosense’s conduct essentially forced St. Jude into litigation to enforce the non-compete. As a result, Biosense was ordered to pay another $662,018 to St. Jude to cover attorney’s fees.
The total bill for Biosense: $1,260,650.