There are some instances in which one employer may attempt to persuade another employer’s employee to quit their job, and work for them instead. This act may be referred to as inducement, as an employee is being induced to leave one employer for another.
Technically speaking, inducement of an employee in and of itself is not wrongful or illegal. Any employee who is not under an employment contract, and wishes to leave their current position in order to work for a competitor, generally may do so. This is especially true if they are in an at-will employment state. It becomes an issue when the competitor utilizes tactics that could be considered unfair, deceitful, or harmful to the employee’s former employer.
When the competitor conducts themselves in such a way, it would be considered wrongful inducement of an employee. The competitor could be held liable for any damages that the former employer suffered as a direct result of their actions.
Exactly what constitutes wrongful inducement can vary from state to state. Generally speaking, inducement of an employee is considered to be wrongful if one or more of the following criteria are met:
- The competitor, or the party responsible for the inducement, intended for their actions to be harmful towards the former employer. An example of this would be if the competitor targets several employees who perform in a specific department. Another example of this would be if the competitor makes a job offer to an employee contingent upon them resigning immediately and without any notice. This would be an employee who holds an important title, or whose departure would present a challenge to the company. Although actual malice may not be entirely necessary, proving that the inducing party knew or should have known about the damaging effects of their actions could be sufficient;
- By resigning, the employee breached their contract. Another example of breaching an employment contract would be if the employee works with a specific competitor after resigning, when that specific competitor has been mentioned in a covenant to not compete within the contract;
- The inducing party has somehow breached a fiduciary duty of loyalty to the employer; and/or
- The competitor hired the employee specifically to obtain the former employer’s trade secrets, or other confidential information. A demonstration of this would be if the employee is then quickly terminated from the inducing party, after leaving their former employer. This would likely be proof that the competitor got the information that they sought after and had no intention of actually retaining the employee.
What Elements Of Proof Must Be Met In Order to Sue For Wrongful Inducement Of an Employee To Leave Employment?
As previously mentioned, the laws governing wrongful inducement of an employee to leave employment vary from state to state. The following are some general elements of proof that must be met in order to make a successful claim.
The employer who is claiming that they were harmed as a direct result of a competitor’s inducement of their employee must prove the following:
- There was a valid and legally enforceable employment contract between the induced employee and their former employer;
- The inducing party knew that their actions would interfere with the employment relationship, and they specifically intended to create this interference;
- The inducing party’s actions were the direct cause of the employee terminating their existing employment relationship;
- The inducement action was wrongful in some way, as previously discussed; and
- The inducing party’s actions caused actual, quantifiable damages to the former employer.
Many of the elements of proof for wrongful inducement are similar to those for breaching an employment contract in general. An employment contract outlines the rights and responsibilities of all who are party to the contract, generally the employer and the employee. Such a contract will also generally state the grounds for termination, as well as how much notice each party is required to provide before terminating the contract.
Employment contracts are legally binding when they meet the following criteria:
- Offer and acceptance;
- Consideration;
- Legality; and
- Capacity.
Because of this, a breached employment contract will be treated in much the same way as any other breached contract. A breach can occur when one party fails to do what is promised within the contract, or when one party acts in such a way that is prohibited by the contract.
An example of an employment contract breach in terms of inducement would be if the contract contained a clause which states that the employee may not be employed by specific competitors for a set amount of time when their current employment is terminated.
What Are the Legal Consequences Of Wrongful Inducement Of an Employee To Leave Employment? Are There Any Defenses?
Legal consequences for wrongful inducement are generally quite similar to those associated with breach of contract penalties. Legal remedies refer to monetary award damages, while equitable remedies are court ordered when a legal remedy would not sufficiently remedy the damage caused by the breaching party. This can include remedies such as specific performance, reformation, or rescission.
The type of legal remedy that is awarded will determine what the injured party may receive, and if the breaching party will be required to take additional action. An example of this would be if a person sells their house, but refuses to relinquish the keys to the buyer during the closing process. The buyer could sue for specific performance, in which case the court would likely force the seller to relinquish their property to the purchaser.
Another consideration would be that the specific type of legal remedy that is awarded will determine how the damages are calculated. An example of this would be if someone has already paid for specific items to be shipped to them. However, the company who owns said items never sends the order; they refuse to do so, while retaining the money. The purchasing party could sue and collect monetary damages, but they may instead choose to seek restitution for the missing merchandise.
Some of the most commonly utilized defenses in cases involving wrongful inducement include:
- The competitor was not actually aware that an employment contract or relationship existed;
- The inducing party did not actually cause the employee to resign;
- The actual inducement was not wrongful;
- The inducement could be considered legitimate business competition; or
- The employer did not actually suffer any quantifiable damages or loss.
What Else Should I Know About Wrongful Inducement Of an Employee To Leave Employment?
Even if the employee is considered to be an at-will employee, and as such is under no contractual obligation to stay with their employer for a specific amount of time, wrongful inducement can still occur.
An example of this would be how an employee who has no specific time obligation to their employer could still owe a duty of confidentiality. Another example is if they previously agreed to reject employment offers from a competitor for a set amount of time after resigning. Because of this, a competitor who induces such an employee could still be found liable to the former employer.
Generally speaking, there is no liability for simply attempting to wrongfully induce an employee. Actual, quantifiable damages must have occurred in order for a claim to be successful. In legal terms, actual damages are proven losses, such as loss of potentially earned income.
Do I Need an Attorney For Wrongful Inducement Of an Employee To Leave Employment?
If you are experiencing issues related to wrongful inducement, whether as the competitor, the employee, or the former employer, you should consult with an experienced and local contract lawyer.
An attorney can determine your state’s specific laws regarding the matter, and how those laws will affect your legal options moving forward. They can file a lawsuit on your behalf, and will also be able to represent you in court, as needed, while protecting your legal rights.
