You've found a strong candidate with exactly the experience your company needs. They've worked for a competitor, understand your industry, and could make an immediate impact.
There's just one complication: they've signed a non-compete agreement.
Does that mean you can't hire them? Not necessarily. But it's something you should understand before moving forward.
Can You Hire Someone With a Non-Compete Agreement?
Yes, you can hire someone who has signed a non-compete agreement, but whether they can legally perform the new role depends on the agreement and applicable state law. A non-compete doesn't automatically prevent someone from accepting another job.
In 2024, the Federal Trade Commission (FTC) announced a nationwide rule that would have banned most non-compete agreements. However, the rule was blocked by a federal court and never took effect. The FTC subsequently abandoned its appeals.
Today, enforceability largely depends on state law and the specific terms of the agreement.
California generally prohibits employment non-compete agreements, subject to limited exceptions. New York takes a different approach, allowing certain restrictions when they're reasonable and protect legitimate business interests.
For more information, see the FTC's guidance on its non-compete rule and the New York Attorney General's overview of non-compete agreements.
Why Should Employers Be Concerned?
Companies use non-compete agreements to protect business interests, including confidential information, customer relationships, and proprietary technology.
But when you're hiring someone who has signed one, the concern is different.
Even if the agreement ultimately proves unenforceable, a former employer could challenge the hire. That can mean legal expenses, delays in the employee's start date, or restrictions on the work they can perform.
For technology companies, this can be particularly relevant when recruiting engineers, product leaders, or executives from direct competitors.
A non-compete doesn't necessarily make someone a bad hire. But you want to know what you're dealing with before you make an offer.
Four Steps to Take Before Hiring
1. Ask about restrictions early.
One mistake employers can make is waiting until the end of the interview process to ask about employment restrictions.
By that point, the hiring team may have spent weeks interviewing someone, agreed on compensation, and started planning around their arrival. Discovering a potential non-compete at that stage creates an unnecessary complication.
Ask candidates early whether they're subject to a non-compete, non-solicitation agreement, or other employment restrictions that could affect the position.
It's a simple question that can save everyone considerable time.
2. Have an employment attorney review the agreement.
Don't assume an agreement is enforceable just because a candidate signed it. And don't assume it's invalid because you've heard non-competes are banned.
An attorney familiar with the applicable state law can assess the agreement, the proposed position, and the potential exposure for your company.
3. Consider whether the role creates a conflict.
Sometimes the concern is limited to particular customers, products, responsibilities, or competitive activities.
Depending on the agreement and applicable law, it may be possible to structure the employee's responsibilities to avoid those conflicts.
That's a decision to make with legal counsel, not something to work out informally with the candidate.
4. Protect confidential information.
Make it clear that you don't expect or want the candidate to bring confidential documents, customer lists, source code, or proprietary information from a previous employer.
Hiring someone's experience and expertise is one thing. Using their former employer's confidential information is another.
Should a Non-Compete Stop You From Hiring?
Not automatically.
Experienced professionals often move between companies in the same industry. In specialized technology markets, competitors may be among the most relevant sources of talent.
A non-compete is a potential hiring risk that deserves attention, not necessarily a reason to eliminate an otherwise qualified candidate.
The important thing is to address it early, before the company and candidate have invested substantial time in a hiring process that could become complicated.
The Bottom Line
Hiring someone from a competitor can bring valuable experience and industry knowledge into your organization. A non-compete agreement shouldn't automatically discourage you from considering that person.
Ask the right questions, understand the restrictions, and involve employment counsel when necessary.
A little diligence early in the hiring process can help prevent a much bigger problem later.
This article provides general information about hiring and employment restrictions, not legal advice. Non-compete laws vary by jurisdiction, and employers should consult qualified employment counsel regarding specific situations.