Legal Q&A: Protecting a business against staff and client poaching

As the economy recovers, employers’ demand for the best talent to add value to their business becomes more fierce. To win the work of their competitors, many employers are looking to recruit key staff or a team of a rival who will bring clients with them.

Where an entire team is poached, this can have devastating effects for the former employer. In extreme cases it may even put the former employer out of business altogether or cause it to cease operating in a particular area of business.

HR professionals who can advise line managers to identify the warning signs will be better placed to protect the business where a competitor attempts to poach individual employees or an entire team.

Q How useful are notice periods?

A Generally, unless otherwise agreed, an employee is bound to give the notice required by their contract. Once notice is given, the challenge for the employer is what to do with the employee. While an employee cannot be forced to work during the notice period where the contract includes a well-drafted garden leave clause, and even in some instances where it does not, the employee can be prevented from working for a rival for a reasonable period.

Employers should be wary of any requests to leave early – an employee may be seeking to join a competitor.

Q What can I do to stop clients being poached by former employees?

A The best way of retaining clients is to strengthen relationships with remaining staff so that clients remain loyal to the business. Handover should be executed carefully and consistent statements provided to clients. Make the retention of any key clients a priority; consider bonuses for remaining employees who retain these clients.

Where the ex-employee is in breach of non-soliciting or non-dealing covenants, consider seeking an injunction to restrain the ex-employee from soliciting clients. Alternative remedies are damages or an account of profits, but by this stage the client’s business and possibly the prospect of any ongoing relationship has been lost.

Q How can I detect a team move?

A Look for signs carefully. Employers should know their business and which teams are susceptible to poaching. The larger the team, the easier detection should be.

Look for any changes in behaviour, including offsite group meetings, unusual absences and/or travel plans, and employees who suddenly nurture new working relationships with one another. Employees will use the employer’s e-mail system to send e-mails that are, on the face of it, legitimate communications but closer inspection may reveal their true meaning. New e-mail groups can give away the employees involved. Unusual activity can often be detected through itemised bills for mobiles and Blackberrys.

The resignation of junior employees can be a sign that a team move is being orchestrated. It is not uncommon for employees with short notice periods and no restrictive covenants to leave the team first so that they can start competing legitimately before senior managers leave the team.

Q Can staff poaching be prevented legally?

A There is nothing to prevent staff poaching unless the ex-employee is in breach of contract.

Where there is a breach, the threat of legal action can be enough to prevent the ex-employee going to work for a competitor. However, this is unlikely where the ex-employee has the financial backing of the prospective employer. Where this does not deter the ex-employee, the employer may be able to obtain an injunction to prevent the ex-employee from  working for a competitor for the duration of any non-compete covenant, damages or an account of profits. Any action must be taken without delay. The full range of options and remedies will depend on any breaches of contract by the ex-employee and any wrongdoing on the part of the prospective employer.

Preventative measures are generally more cost efficient than bringing legal action. It is crucial the employer knows its business to minimise risk and does not commit any fundamental breach of contract, rendering restrictive covenants unenforceable. Ensure that employees’ contracts contain well-drafted garden leave and confidentiality clauses together with tightly drafted restrictive covenants that are closely linked to the employee’s role.

Kate Brearley, partner, and Sarah Gallon, associate, Stephenson Harwood

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