When Is Raiding A Competitor's Employees Illegal?
Gaining a competitive advantage by hiring key employees away from a competitor used to be an every-day occurrence. The practice has rapidly fallen into disfavor as almost every jurisdiction in the United States, including Virginia, has adopted and routinely enforces a cause of action for tortious interference with contractual relationships and business expectancies. Application of this legal theory has become more prevalent in recent years as the high-tech industry increasingly relies upon the creative efforts and innovations of individual employees and contractors -- individuals who are in high demand and often find lucrative financial offers from competitors irresistible. This article is intended to help companies understand and protect their legal rights when key employees are raided. It is also designed to alert the raiding competitor and individual employee or contractor to potential risks and consequences which may arise from a switch in allegiance. Lastly, this article addresses the arguably unsettled issue of how Virginia law defines the protectible "business expectancies" with which you may not interfere.
Consider the following factual scenario: Company X competes with Company Y in the development of software for telecommunications firms. Both companies produce software which provides for the most efficient use of transmission lines. However, Company X learns that Company Y is getting close to solving a problem which has plagued both companies. Once solved, Company Y's software will have a significant edge in the marketplace. Instead of trying to resolve the issue on its own, Company X decides to take a shortcut. It approaches a number of Company Y's key software engineers and hires them away with lucrative stock options. Did Company X properly compete for the engineers' services or has it violated the law related to intentional tortious interference with contracts?1
The answer requires examination of whether: (1) Company Y had a valid contractual relationship with the engineers; (2) Company X knew the engineers were under contract with Company Y; (3) Company X intentionally approached the engineers and caused them to breach their contracts; (4) Company Y was damaged by the interference and breach; (5) the engineers were hired for a fixed duration, no duration or could otherwise terminate their contracts at-will; and (6) Company X used "improper methods to lure the engineers away.
Regardless of whether the engineers were hired as...
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