When recruiting an executive, or when being recruited, it is best practice for the future employer, the employee and any executive recruiting firm involved in the placement to address head-on the existence of any restrictive covenant limiting the future activities of the employee. The New York State Supreme Court - First Department Appellate Division - yesterday upheld a claim that by not clearly disclosing the existence of a non-solicitation restriction in an executive recruit’s employment agreement, the head hunter involved in the placement could potentially be held liable to the new employer for negligent and/or fraudulent misrepresentation. See Amsterdam Hospitality Group v. Marshall-Alan Associates, Index Number 113685/11 (1st Dep’t Aug. 28, 2014).
Knowing what restrictions are in a recruit’s agreement and obtaining sound legal advice about the enforceability thereof enables all the parties involved in the recruiting process to assess, mitigate and avoid the risks attendant to hiring individuals subject to non-compete or other restrictive covenant provisions. Failing to ask or disclose, on the other hand, can potentially expose everyone involved to claims of breach of contract, tortious interference or worse yet, fraud. “Don’t ask, don’t tell” can be a dangerous policy when recruiting executives with employment agreements containing restrictive covenants.