Two years ago, NBA coach Doc Rivers accepted a five-year contract from the Boston Celtics for an unprecedented $7 million per season. That’s a bunch of money for a coach not named Phil Jackson.

The kicker? The Celtics added a non-compete clause.

But with the Celtics headed for a rebuilding decade year, Rivers [...]]]>

Two years ago, NBA coach Doc Rivers accepted a five-year contract from the Boston Celtics for an unprecedented $7 million per season. That’s a bunch of money for a coach not named Phil Jackson.

The kicker? The Celtics added a non-compete clause.

But with the Celtics headed for a rebuilding decade year, Rivers wants out. If he quits, he can’t coach another team for the remainder of his contract. The Celtics are exploring trades – the Clippers are a likely destination – and they are demanding consideration in return.

NBA teams fire coaches all the time (12 teams changed coaches this off-season), so why can’t the Celtics just release Rivers? Is his non-compete even enforceable?

Pretend for a moment that Virginia law applies to Doc Rivers’ non-compete contract – because I’m a Virginia lawyer and this is a Virginia law blog. Each state has different contract law, and Virginia law is not so different from Massachusetts law in this area.

Under Virginia law, non-compete contracts are disfavored unless reasonably limited in scope. Companies must prove a “legitimate business purpose” for preventing an employing from working at a competitor. There are three factors that guide Virginia judges to determine whether a non-compete is reasonable: duration, function, and geographic scope.

If any of the factors are unenforceable, then the whole non-compete is unenforceable. So let’s apply the factors to Rivers’ contract:

• Duration – The term of the non-compete contract with the Boston Celtics is five years – but the clock starts ticking while Rivers is employed as coach. In other words, the non-compete expires the minute the Celtics stop paying him under the contract. Virginia courts will generally uphold non-compete provisions that last up to two years after the employee has left the company. Here, the non-compete expires when Rivers’ employment expires – and he would have a tough time arguing that a $7 million payday is insufficient consideration while he sits on the sidelines (or in the broadcast booth).

The verdict? Enforceable.

• Function – The functional limitation of the non-compete is restricted to coaching. Doc Rivers cannot coach another NBA team during the five-year term of the contract. Virginia courts will uphold non-compete contracts that pass the “Janitor test” – meaning, so long as the non-compete does not prevent you from sweeping the floors at a competitor, but rather is limited to your current job, then it is reasonable. Here, Doc Rivers is simply prevented from doing the same thing for a competitor that he does for the Celtics: he can’t coach. But he can work as a scout, or a GM, or heck, even play PG (paging the Heat).

The verdict? Enforceable.

• Geographic Scope - Here is where it gets tricky. The geographic scope of the non-compete covers the entire NBA. Under Virginia law, the geographic scope of the non-compete can’t be any greater than wherever a competitor is located. The key word is “competitor.” The Boston Celtics made the playoffs this year; my team, the Detroit Pistons, went fishing. Is anyone seriously arguing that the Pistons are “competitors” with the Celtics, even if they play each other twice a year? Please. The Pistons are destined for tank-ville in next year’s Andrew Wiggins sweepstakes. A geographic scope that covers every NBA team is simply too broad – it embraces competitors and non-competitors alike.

The verdict? Unenforceable!

Coca Cola hires Pepsi’s top-notch public relations manager. Dunkin’ Donuts snags Starbucks’s chief financial officer. Yahoo steals away Google’s vice president for search products.

Fictional or not, doesn’t it sound kind of fun to consider hiring the star employee of your competitor? The mere suggestion of poaching a rival’s talent pool is both thrilling and [...]]]>

Coca Cola hires Pepsi’s top-notch public relations manager. Dunkin’ Donuts snags Starbucks’s chief financial officer. Yahoo steals away Google’s vice president for search products.

Fictional or not, doesn’t it sound kind of fun to consider hiring the star employee of your competitor? The mere suggestion of poaching a rival’s talent pool is both thrilling and scary. Thrilling because there is a great potential to boost business. Scary because if you approach a competitor’s employee the wrong way, you could find yourself embroiled in expensive litigation that keeps you occupied for years.

If you want to hire a competitor’s employees, here’s a quick checklist.

If you are a Virginia business that wants to hire a competitor’s employees, you need to start with good legal advice.

Start by calling a lawyer. Yes, sometimes legal advice doesn’t make sense. It’s counter-intuitive. It’s complicated. The following advice is without explanation. It is simply a things to-do list. You really should get a lawyer before you hire from a competitor. Not after – by then, it’s too late. Be proactive.

So here is the list of things to consider before hiring away your competitor’s top performer:

1. Get a Lawyer - Hire an employment lawyer in the state where the other employee works to advise you. The state where you work doesn’t matter and the law doesn’t likely apply. See, I told you to hire a lawyer.
2. Don’t Write it Down - Until you are ready, do not put anything in writing. Don’t email the employee – text to send a note. Call. Better yet, meet in person.
3. No Secret Stealing - Tell them you have no desire to obtain the secret information of the other company. Say it and mean it. If you take that secret info you have violated the Virginia Trade Secret Act and likely opened yourself up to a big expensive gross lawsuit.
4. Define Roles - Find out the role of the employee now – and decide whether you want that role to be the same.
5. Review Contracts - Find out of they have an employment contract. If you, read it. Have your lawyer read it. If no contract, dig further. Is it possible they forgot?
6. Price the Risk - Decide right now if this employee is worth the $50,000 you may have to pay in litigation expenses. Many times, a strategic acquisition justifies a remote risk of litigation, but you need to price the risk now. 
7. Tell No One - Do not tell clients or employees about your plans until everything is finalized. 
8. Keep it Positive - Tell the potential employee you have no intent to harm their current company. None. You wish them all the best. You don’t want to steal clients or customers. You just want to hire a great person! (Even if you don’t mean any of this – say it).
9. Consider Costs - Decide right now if you are willing to pay the employee’ attorneys fees. This is often a deal breaker if you are not and it is better to calculate this with the offer.
10. Do Your Homework - Investigate whether the other company has sued employees in the past. If so, were they successful? Again, this is where a lawyer comes in.
11. Talk it Over - Discuss with all the decision makers.
12. Plan the Transition - Tell the employee you don’t want them to access any work information, email etc. after hours or forward any email to them. If they do – deals off.

Do all of the above, and you can make a good decision as to whether to hire from a competitor. Good companies get legal advice and plan for risk – and great companies attract great employees.