Good employment contracts have non-circumvention clauses preventing employees working for rivals. This is particularly true for key employees. Please ensure your employment contracts have these clauses, if you are unsure do contact us and we can help with no charge.
Always make this clear to your prospective employee that they should not do this in both the interview and just before they start. It may be indicative of that your corporate strategy is not fully developed to incorporate building the requisite skills inside your organisation or client contacts. We can assist with bullet proofing your corporate strategy to cater for such risks.
Hiring talent from competing companies can bring a commercial and tactical advantage to your business, however, when it happens to you it can severely harm your business. If you do it you could be sued for breaching a non-circumvention or non-compete clause through the employee you have poached. Worse still you could bring into your organisation data through this employee that belongs to another organisation.
Always make this clear to your prospective employee that they should not do this in both the interview and just before they start. Here is a full judgment of the recent court decision of Rolfe & Ors v. Veale Wasbrough Vizards LLP [2021] EWHC 2809 to help you understand the risks of deliberate use of other people’s data breaches. Even if you win in court, you don’t want to take the risk of doing this as a business.
What is poaching?
Poaching is where a company hires one or more employees from a competitor or similar company in order to leverage an advantage because of the employee’s knowledge of their former employer, contacts or a particularly specialise set of skills.
Poached employees can take clients, insider knowledge and their valued skill to your competitor which can have devastating effects on your business. Not only this but senior employees might even take other employees with them.
Is poaching staff legal?
Poaching staff from a business competitor is not against the law. It is common for employers to recruit staff within their own industry as these employees have greater industry knowledge.
Providing that an employee complies with their notice provisions under the terms of their employment contract resigning will not, in itself, constitute a breach of contract. However, contractual provisions (such as restrictive covenants or non-complete clauses) can restrict an employee’s post-termination employment activity.
Employers should be aware that strict contractual provisions, if not common place in the industry, can turn potential employees away from considering working for the business.
How to prevent poaching
As an employer you can take a number of measure to prevent poaching and limit its impact. This can include termination restrictions in your contract of employment, providing incentives to employees to stay and grow with the business or simply by outcompeting other competitors (easier said than done).
Restrictive Covenants
Restrictive covenants can limit the activities of an employee after they have been terminated. These provisions continue to operate after employment has ended but can only be enforced to protect an employer’s legitimate business interests. Restrictive covenants that are unreasonable or simply stop competition are not likely to be enforceable – ensure it is well drafted to avoid this!
The most common restrictive covenants for limiting the effects of poaching include:
· Confidentiality clauses – preventing ex-employees from passing on important information
· Non-complete clauses – restricting employees from working with a competitor
· Non-solicitation clauses – restrict poaching existing or prospective clients
· Non-poaching clauses – preventing the ex-employee from poaching colleagues
· Non-dealing clauses – preventing the ex-employee from dealing with former clients
Sometimes poaching is inevitable, in some industries turn over is high and so the best way to limit its impact is to avoid your employee taking important information and clients.
Vary Employee-Client Relationships
Varying your client’s relationship with a single individual can prevent the client being loyal to a particular employee. Whilst this may run the risk of undermining the relationship it will also prevent the client from following the employee in the event they are poached. This should be an important part of the risk assessment of your business which should be in your business strategy.
Identify at risk employees
Some employees are more likely to be poached by staff. Identifying those at risk can help to prevent this. Typically, employees who are poached are offered more development opportunities, higher wages and other incentives so by matching or outcompeting other competitors you can avoid poaching.
Some employees will move because of business culture. Sometimes this cannot be prevented but a business should always try and motivate their employees as much as possible. High levels of poaching, or a low attrition rate, can indicate some systemic issues within the business.
Seeking legal advice
The law relating to poaching employees can be complex, to avoid legal issues seek expert legal advice from an employment law specialist to get guidance. It is best to take the advice of a professional to safely recruit new employees and limit the potential of poaching from competitors.
Michael McParland LL.B (Hons) and Dr Abhijit Pandya (PhD).
Legal Executive, Pandya Arbitration Global (ÓPA Global 2022).
Legal Disclaimer – The matters in this article are for general information purposes only and does not constitute legal advice.
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