CVS Hire Blocked by Walmart
By Tom Ryan
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
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
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
In an e-mailed statement sent to Bloomberg News, a CVS spokesperson
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
- A Man With Muffin Secrets, but No Job With Them – The New York Times