Top Legal Considerations for Rehiring Former Employees

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Jun 2, 2021
This article is part of a series called COVID-19 Coverage.

As more businesses begin to reintegrate employees into their pre-pandemic workplaces, many of our clients have questions regarding return-to-work issues. Below are three of the most common ones. Answers focus on compliance with federal law, but as always, you should also take state and local laws into consideration.

1. We furloughed and then terminated employees due to the economic impact of the pandemic back in spring 2020. We eliminated some positions but now have a business need to re-create those positions. Frankly, we don’t want to rehire the previous employee who used to hold the position. Are we obligated to hire them back and, if not, what steps can we take to best protect ourselves against a claim?

No employer is obligated to rehire an individual who had previously been employed with the organization, subject to any union collective bargaining agreement. If there is a legitimate business need to re-establish a position or multiple positions, document that legitimate business need internally through some kind of memorandum, e-mail, or other note to a file. If the business need is legitimate, move forward with it.

You can treat past employees, even those who previously held the position, in the same manner as new applicants for the position. There is also no need to make a special effort to make past employees aware of job openings, even if the opening is the position that individual had previously held.

If there are legitimate performance concerns from the past period of employment, it is perfectly fine to take those performance concerns from prior employment into consideration as part of this new hiring process.

Like any business decision, document the legitimate reasons for making the selection of one candidate over another candidate. If the individual who had previously held the position is not the best candidate for the position, do not hire them. If that individual complains formally or informally, your organization can rely on the legitimate business reasons that you have documented for the decision.

2. We are excited to be hiring again but are finding more and more candidates have non-compete or other restrictive covenants with their current employers. What do we need to be cognizant of as we manage through a potential relationship with a candidate with a non-compete restriction?

As an initial matter, it is important to remember that non-compete restrictions and other restrictive covenants (such as employee non-solicitation restrictions) are governed by state law. In theory, and often in practice, a new employer of an individual subject to non-compete restrictions could be threatened with a “tortious interference with contract” claim. 

This theory is based on the idea that by employing the individual in violation of their non-compete restriction, the new employer is interfering with the old employer’s contract — the contract not to compete. Businesses are wise to carefully manage an applicant with non-compete restrictions from a prior employer.

First, employers should ask for a copy of any restrictions. Additionally, employers should obtain some representation from candidates that the candidate has made the prospective employer aware of any non-compete or other restrictive covenant restrictions. This can be done in an offer letter, an employment agreement, or a simple written communication.

Then the determining factor is whether the non-compete restrictions can be enforced under applicable state law. Some states make it difficult for employers to enforce non-compete restrictions. Other states allow for courts to modify any overly broad restrictions to make them reasonable and enforceable.

One other thought to keep in mind: It is easy for a former employer to send a nasty cease-and-desist letter threatening legal action. It is an entirely different level of cost and angst to actually sue a former employee for an alleged breach. Former employers often suspect the cost of the legal defense for that former employee will be paid by the new employer, which makes them carefully consider whether they want to initiate formal litigation in a public forum.

Given all the nuance and strategy, the value of legal counsel in these situations is significant.

3. We need to refill positions and have offered jobs to some employees who were on the lower end of the wage scale, but they are non-responsive or say they do not want to work yet. We suspect that the employees are making more money on unemployment than they would make working for us. What do we do?

This is a reality of the current job market, and this issue is generating more attention in mainstream media as of late. With federal enhancements to the unemployment insurance payments, some individuals have concluded that they are better off on unemployment than in a regular-paying job. Others still have legitimate concerns related to safety during the pandemic.

For employers, it is best to document that the individual has been made aware of the job opportunity and/or the offer of employment.

To maintain the relationship with the individual — who is a prospective future employee — it may be best to maintain communication with the employee until the federal enhancements expire and pandemic eases, at which time the individual may be interested in returning to the workplace.

This article is part of a series called COVID-19 Coverage.