Can a company be sued for encouraging another business to fire its employee?

Yes, a company can be held liable for encouraging another business to fire an employee unless it has a legitimate reason for doing so.  If the employee is an “at will” employee, as most employees are, then the employee must show that the company intentionally interfered with his or her employment using “improper methods” to cause his or her termination.  Because “improper methods” need not be unlawful, but need only violate an established standard of a trade or profession, such a claim may be easy to assert, forcing the company to justify its actions in causing discharge.

This situation often arises when an employee under a non-compete leaves to work for a competitor.  In such circumstances, the former employer often threatens the new employer that it must fire the employee or it will be sued for interfering with the non-compete by causing the employee to violate it.  This puts the new employer in the difficult position of deciding whether to keep the employee, which might cause the former employer to sue for intentional interference with the non-compete, or end the employment, which might cause the employee to sue for intentional interference with his employment.

Many courts considering this scenario have ruled that the former employer can be liable for the firing if the non-compete is invalid or overbroad.  The mere existence of a non-compete may not justify the former employer’s actions if the non-compete is unenforceable.

Because of the danger that exists, a company should typically refrain from interceding in an employment relationship to which it is not a party, or from encouraging any other business to fire an employee, unless it has a highly defensible reason to do so.  If the reason is enforcement of a non-compete, the company should first consult with skilled employment law counsel to determine if the non-compete’s terms are enforceable and craft an appropriate approach to prevent competitive harm.