Poaching of City teams highlights legal risks to employers

Employers “should be wary” of poaching staff from rival firms and look to introduce restrictive covenants to protect their own employees, legal experts have said.

Last week the inter-dealer broker Tullett Prebon took its rival BGC Partners to the High Court, alleging BGC had engaged in an unlawful conspiracy to poach 50 of Tullett’s top-performing brokers, which would ruin its London business. BCG has admitted it poached the staff but said it acted within the law.

RBS has also seen up to 1,000 of its top investment bankers leave and join rival banks, including Nomura, Barclays Capital, and Société Générale, where pay rises and bonuses are expected to be larger than at the state-owned bank.

Fiona Bolton, employment partner at the law firm Eversheds, said despite the recession she was now seeing more cases of team moves as rewards were reduced or withdrawn.

But Bolton warned employers that, although it was not illegal, they should be cautious about poaching teams and must acknowledge the conditions placed on the departing employee.

She said: “It may be tempting for competitors to try to get ahead by poaching teams and acquiring a business in that way rather than going to the expense of buying the business.

“However, businesses should be wary of embarking on team raids and should always consider any express or implied restrictions to which a departing employee may be subject.”

She added that employers, as in the case of BGC Partners, could face legal action if their actions were seen as a conspiracy to poach staff or if employees were encouraged to solicit other staff or disclose confidential information from a previous employer.

XpertHR’s employment law editor Susie Munro said that employers could protect themselves and their teams by including restrictive covenants in staff contracts.

“Firms can try to stop employees joining a competitor by including a restrictive covenant in their contract; this is a contract clause that attempts to limit the employee’s activities after he or she leaves the firm,” she said.

“Restrictive covenants can also be used to prevent former employees setting up in competition and poaching their former colleagues from the firm. If another firm is trying to poach employees who are covered by restrictive covenants, that firm could be found to be acting unlawfully by inducing the employees to breach their contracts.”

XpertHR FAQs on restrictive covenants

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