Legal Question in Employment Law in New York
Merger effects on existing contracts
Corporation A leases equipment and services to Corporation B. The contract includes a ''no-hire'' clause which prohibits Corporation B from hiring any employee from Corporation A that it comes into contact with as a result of the contracted services. The No Hire clause is for the life of the contract plus one year. Corporation C merges with Corporation B. Corporation B as an entity disappears and all of its employees and products are absorbed by corporation C. Corporation A still provides the equipment and services to Corporation C/B for the life of the contract.
Does the No Hire clause prohibit Corporation C from hiring a Corporation A employee?
2 Answers from Attorneys
Re: Merger effects on existing contracts
The answer is "probably." However, a full answer would depend upon the interpretation of the language from a number of contracts, including the original contract for the provision of leased equipment & services; the merger contract (if available); and any subsequent contract or "consent" that Corporation A gave either to Corporation B or Corporation C as part of the merger.
-- Kenneth J. Ashman; www.AshmanLawOffices.com
This communication is intended for general informational purposes and is not intended to create an attorney-client relationship, which, under the policies of Ashman Law Offices, LLC, can only be created by execution of a formal retention agreement.
Re: Merger effects on existing contracts
As a general rule, the answer turns on the language of the contract. If there is language that the "no hire" restrictions are binding on the parties to the agreement and their respective "successors and assigns" there is a pretty good argument that the restrictions apply to Corporation C.
As you might expect, the analysis is more complicated than I have indicated. I recommend that you have the matter reviewed by qualified legal counsel if you are contemplating a move. Moreover, if Corporation C is interested in hiring you, they might be willing to defend and indemnify you if you come to work for them and are sued under the restrictive covenant. Any promise like this, of course, would have to be in writing to be enforceable.
Good luck.
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