Excited about the prospect of a talented new hire and think that her non-compete doesn’t affect you? Think again. Under Virginia law, a future employer, who is aware of a prospective employee’s non-compete agreement, risks legal liability for tortious interference of contract and, through that, business conspiracy.
In DePuy Synthes Sales, Inc. v. Jones, 2014 WL 1165852 (E.D. Va. Mar. 21, 2014) (adopting magistrate’s report and recommendation in 2013 WL 8118533 (E.D. Va. Nov. 5, 2013)), the Eastern District of Virginia recently applied Virginia law to deny a motion to dismiss claims of tortious interference of contract and statutory business conspiracy on the grounds that the future employer knew of the existence of the non-compete agreement and nonetheless proceeded to hire two salespersons in a capacity that would require them to violate their non-compete agreements.
DePuy Synthes Sales, Inc. (“DePuy”) employed two salespersons, Michael Jones and Jacob Schools, to market DePuy’s line of orthopaedic medical devices to doctors. Both men left DePuy and began working with Sky Surgical, Inc. (“Sky Surgical”), a competitor, in violation of their non-compete agreements. DePuy filed a complaint alleging, in part, Sky Surgical’s tortious interference with Jones and Schools’ non-compete agreements and statutory civil conspiracy under Virginia Code Sections 18.2-499 and 500.
Tort of Tortious Interference
The court denied Sky Surgical’s motion to dismiss this claim. Under Virginia Law, to state a claim for tortious interference, DePuy only had to plead four elements: (1) existence of a valid contractual relationship or business expectancy; (2) knowledge of the relationship on the part of the interferor; (3) intentional interference inducing or causing a breach or termination of the relationship; and (4) damage to the party whose relationship was disrupted.
The critical issue here was whether the contract was terminable at will. If a contract is terminable at will, Virginia also requires that the interference be accomplished by “improper methods,” like bribery or fraud. However, whether a contract is terminable at will is not always clear cut. In another case, the Virginia Supreme Court has explained that the extent of permissible third party interference increases as the degree of enforceability of a business relationship decreases. Here, the court looked to the non-compete agreement, not the customer relationships with doctors (which were admittedly at will) to determine whether improper methods must be plead. Because the non-compete agreements were not terminable at will, DePuy was not required to plead “improper methods.”
Under Virginia Code Section 18.2-499 and 500, injured parties can recover treble damages for conspiratorial conduct performed for the purpose of “willfully and maliciously injuring another in his reputation, trade, business or profession by any means whatever.” The conduct of the conspirators must be considered unlawful. In a recent case, Dunlap v. Cottman Transmissions Systems, LLC, 754 S.E.2d 313 (2014), the Supreme Court of Virginia resolved a long-standing ambiguity, holding even though breach of contract is not sufficient to constitute an “unlawful act,” tortious interference with contract and tortious interference with business expectancy do each constitute the requisite “unlawful act” to proceed on a statutory business conspiracy claim. Therefore, by adequately pleading tortious interference with contract, DePuy was also able to plead statutory business conspiracy against Sky Surgical.
No matter how excited an employer may be about a prospective hire, when non-compete agreements come into play, an employer must carefully analyze the applicable terms of the non-compete and seek the advice of legal counsel before extending the offer. Likewise, a former employer may have two possible causes of action against the employer that pilfered its employees.