Where a business learns about an employee’s then-existing non-compete and non-solicitation agreements after hiring him, the business’ continued employment of the individual—albeit, in violation of the agreements—does not induce the individual to violate the agreements. Charah, LLC v. Sequoia Services, LLC, 2019 NCBC 17 (J. Robinson). As a result, the former employer cannot maintain a claim for tortious interference of contract against the new employer.
In 2015, when Plaintiff hired Stephen Carroll as a field engineer for its coal ash services, it had him sign an employment agreement that contained a non-compete and a non-solicitation provision which were to continue for two years after Carroll’s employment ended. In 2017, Carroll voluntarily terminated his employment with Plaintiff and immediately went to work for Defendant, a direct competitor of Plaintiff. While working for Defendant, Carroll called on one of Plaintiff’s main customers. Both his employment with Defendant and the solicitation of Plaintiff’s customer constituted breaches of Carroll’s employment agreements. In March 2018, Plaintiff notified Defendant of Carroll’s restrictive covenants and sent Defendant a copy of the employment agreement. Nonetheless, Defendant continued to employ Carroll, including permitting Carroll to interact with the customer.
In April 2018, Plaintiff sued Carroll for breach of the employment agreement. In October 2018, Plaintiff amended its complaint to assert claims against Defendant for tortious interference with contract and unfair trade practices. Shortly thereafter Plaintiff dismissed its claims against Carroll with prejudice. Defendant then filed a motion to dismiss.
In granting Defendant’s motion to dismiss, the Business Court found that Plaintiff failed to allege facts sufficient to satisfy the “inducement” element needed to maintain a tortious interference with contract claim. The Court held that Defendant’s mere continued employment of Carroll after learning of the employment agreement in March 2018 was not “…the sort of ‘purposeful conduct’ or ‘active persuasion’ necessary for inducement.” (Opinion, ¶41). In addition, the fact that Defendant allowed Carroll to continue to participate in business activities with the customer as part of his employment was likewise not enough to show inducement by Defendant. As a result, the Court dismissed the tortious interference with contract claim and its tag-along UDTP claim. The dismissal was without prejudice, however, based upon Plaintiff’s assertion that information learned in discovery had revealed Defendant knew about Carroll’s employment agreement prior to hiring him. The Court thus left for another day whether such facts, if alleged, might enable the two claims to survive.
Based upon this decision, a business would be well-served not to learn about a potential employee’s restrictive covenants before hiring her. If the business first learns about the covenants after hiring the employee, it is unlikely the business would be liable for tortious interference with employment contract.
Categories: Key Business Court Decisions