Beware Hiring Non-Compete Employees

By Sonal Shah, JD, Assistant Director, Employment Law Services
Published January 14, 2025

While non-compete agreements have come under attack the last few years, properly drafted agreements still remain viable and enforceable. So, it’s important that employers take them seriously. This was made apparent last month in the case of Frey Construction & Home Improvement, LLC v. Hasheider Roofing & Siding, Ltd.

In this case, a Wisconsin employee who was bound by a non-compete agreement with their employer Frey Construction resigned and went to work for a competitor, Hasheider Roofing. In response, Frey Construction filed suit against its former employee for breach of the non-compete agreement and against Hasheider Roofing for tortious interference with contract (essentially alleging that Hasheider Roofing wrongfully and illegally interfered with the contract between itself and its former employee).

The circuit court granted Frey Construction's motion for summary judgment concluding that: (1) Frey Construction was entitled to summary judgment on its tortious interference with contract claim; (2) disgorgement of Hasheider Roofing's profits during the relevant time period was an appropriate remedy; and (3) Hasheider Roofing was liable for Frey Construction's attorney fees incurred in Frey Construction’s previous lawsuit against the employee for his breach of the non-compete agreement.

On appeal, the Wisconsin Court of Appeals held there were issues of fact regarding whether Hasheider Roofing intentionally interfered with the non-compete agreement and that the issue should be remanded back to the lower court. The Court of Appeals then went on to hold that if Hasheider Roofing did intentionally interfere with the non-compete agreement, disgorgement would be an appropriate remedy. The court explained in this issue of first impression that if an employer interferes with a non-compete agreement by hiring an employee who is prevented from working for the organization, and profits as a result, an appropriate remedy is to require the employer to give up (i.e., disgorge) those profits resulting from its unlawful hire of the employee. 

While it is unclear whether Illinois courts would also allow disgorgement as a remedy, this case has some important takeaways for employers. First, if you have concerns about an employee leaving your organization to work for a competitor and the damage that would do to your business, consider implementing a non-compete agreement. Second, if you have a non-compete in place (that is updated and compliant with federal and state law), remind employees of the agreement and its implications upon separation of employment. If they do breach the agreement, consider taking legal action. Third, ensure you conduct your due diligence and ask all applicants if they are bound by a non-compete agreement that could affect their ability to work for your organization. If there is a non-compete agreement in place, review the agreement and discuss the implications with legal counsel to ensure you understand any risks involved. As the Frey case demonstrates, failure to do so is not only risky, but could result in legal action and steep penalties.

HR Source members with questions about non-compete agreements can contact our attorneys through the HR Hotline Online or at 800-448-4584.