Walmart last week sued CVS to prevent the drugstore chain from hiring a former regional head, becoming the latest executive shuffle embroiled in a non-compete clause.
In its lawsuit filed in Delaware Chancery Court, Walmart said Hank Mullany, who was hired by Walmart in 2006, signed a non-compete agreement in December 2009 when we has promoted to president of Walmart North. The agreement effectively barred him from joining a competitor for two years after leaving Walmart, according to the suit. He resigned in October and left Walmart in November. On Dec. 3, CVS said he was hired as president of CVS/pharmacy. On Friday, the judge overseeing the case blocked Mr. Mullany, who was scheduled to start at CVS on Monday, from taking his new post until after a Dec. 15 court hearing.
Walmart in its suit said that Mr. Mullany, who oversaw 587 Walmart doors in 13 states, was "privy" to Walmart's national strategies and responsible for implementing them in the northeast. In particular, he was the "executive sponsor" of Walmart's plans to develop smaller (10,000 and 20,000 sq. ft.) stores to reach more urban areas.
"Mullany was the executive sponsor of Walmart's 'smaller-format' strategy, and was intimately involved in all facets of Walmart's pilot 'smaller-format' program, including merchandising, store layout, pricing strategies, and real estate issues, as well as plans to roll out Walmart's 'smaller-format' plan on a larger scale," the complaint states, according to the Financial Times.
In an e-mailed statement sent to Bloomberg News, a CVS spokesperson said, "The company and Mr. Mullany believe the allegations in the lawsuit are without merit" and "intend to aggressively defend the lawsuit."
Another article in The Philadelphia Inquirer exploring a non-compete lawsuit involving a sales team from a medical supply starting a competing company indicated that such cases are on the rise. In an improving economy, hiring firms are more willing to absorb the litigation costs in fighting a non-compete clause to gain a star recruit. With the cases often coming down to interpreting the strict guidelines of such clauses, they often settle favorably on the interest of enabling someone to earn a living.
But the Inquirer article also stated that with trade secrets now easily transferable via laptops and e-mails, more are being decided on behalf of the former employer.
In one high-profile case earlier this year, Bimbo Bakeries USA, which owns Thomas' English muffins, successfully prevented a former executive from joining Hostess Brands. The suit stated that the executive was one of only seven people who knew the recipe that gives English muffins their "nooks and crannies."
Discussion Questions: Do you tend to side with the ex-employer or the ex-employee in situations involving non-compete clauses? Are there positions at retail that you think should usually be subject to non-compete clauses?
- Walmart Sues CVS Over Hiring of Former VP Mullany - Bloomberg News
- CVS Caremark Appoints Hank Mullany as President of CVS/pharmacy - CVS
- Walmart sues CVS over top executive - The Financial Times
- Employee confidentiality a bigger issue in a tougher economy - The Philadelphia Inquirer
- A Man With Muffin Secrets, but No Job With Them - The New York Times