Artificial Turf Ruling May Make It Safer To Provide Legal Assistance To New Hires

A recent decision from a Georgia federal court offers hope that hiring employers may be able to provide financial assistance — even going as far as indemnifying their new hire from legal liability from their former employer — without creating significant exposure.

Employers frequently hire employees who have continued contractual obligations to their former employer, whether it is a non-disclosure, non-solicitation, and non-competition agreement. Litigation is common, even when the former employee is honoring the restrictions, and the cost of litigation can quickly exceed the resources individuals have to defend themselves. Hiring employers often need to consider providing assistance to new hires caught in the crosshairs, but doing so comes with risk as it can expose the company to legal liability for tortious interference or related claims.

FieldTurf USA, Inc. v. Polyloom Corporation of America: Reasonable Indemnification

In FieldTurf USA, Inc. v. Polyloom Corporation of America, a case before Judge Victoria Calvert in the Northern District of Georgia, plaintiff FieldTurf USA, Inc. sued a former employee for allegedly breaching his employment agreement and misappropriating valuable trade secrets. FieldTurf USA, Inc. also brought claims for tortious interference with contract and misappropriation of trade secrets against the former employee's new employer based on allegations that the new employer agreed to indemnify its new hire against claims from his former employer. The court allowed the claims to proceed against the former employee, but dismissed the claims against the new employer, citing the reasonableness of entering into an indemnification agreement in light of frequent litigation in this area.

Judge Calvert noted that the results would be "troubling" if the court were to adopt a rule opposing indemnification of new employees against suits by former employers. She recognized that employers commonly bring suits against their former employees and their new companies "for in terrorem effect" and thus "negotiating a term of indemnification" was a "reasonable step to take even absent any improper motive."

Will the FieldTurf Ruling Find Its Footing in Future Decisions?

The FieldTurf USA, Inc. ruling is just one recent decision from a federal court in a single jurisdiction. It is unclear whether other federal courts will take the same stance, or if state courts will follow suit. There is authority in state court in Georgia, for example, and some other states that an employer's agreement to indemnify employees allegedly in breach of their employment agreements could be considered by the jury as both evidence of the employer's improper motive and also sufficient motivation to induce an individual to breach a contract that would otherwise be honored. This potential conflict between state and federal decisions in Georgia will likely become a focus of future opinions, and only time will tell if this recent decision has staying power. Thus, while this decision provides some welcome relief to hiring employers, decisions in this area continue to entail significant potential risk. If faced with this situation, it is critical that companies reach out to counsel for guidance. The timing of any agreement to provide assistance (before or after a breach of the agreement), as well as the motives to provide assistance, are some of many relevant factors to consider in evaluating potential exposure. Bradley's Labor & Employment attorneys are available to answer any questions that you may have.

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