How to defeat the “Recruitment Sergeant”/poach great employees
Q. what can I do if an ex-employee decides to compete with my business by poaching current employees, using confidential information and/or diverting business?
Talent poaching is a commercial reality in today’s economic climate, so it’s best to be prepared. You can take steps to stop employees and associated parties getting a head start from their unlawful acts. A key tactic in team move situations is to seek an injunction”.
A few simple steps that will help you preserve your competitive edge
1. Post Termination Restrictions
Review and if needed update your post termination restrictions to check that they are still enforceable and that they work in relation to the relevant employee.
2. Record keeping
Keep all agreements in a safe and easily accessible place. Review them when employees change roles or are promoted. Have secure back up copies. Ensure that you have signed copies of the agreements on your file.
Study your employee turnover patterns. These can create a base to form meaningful recruitment and retention plans. Are you keeping track of any patterns in exit interviews and genuinely following these up?
Label confidential information as “confidential” and restrict access by using passwords, locking cabinets and keeping up to date signed confidentiality agreements.
5. Strategic retention plans
Consider if there are any incentives which would dissuade key personnel from defecting without becoming golden handcuffs. Long term incentive schemes can really help you achieve your aims.
6. Cunning plans
There may be things you can do to alert you in advance to any wrongdoing. How about seeding your client database with false email addresses that revert back to you? Anyone emailing the entire database having copied it will be emailing you.
Q. What can I do if the preventative steps are not enough?
With talent raids on the rise there will be circumstances in which you will need to use defensive tactics in order to preserve your competitive edge.
If you do become suspicious, act fast:
- Take steps to identify the level of risk and implement steps to defend against the team raid.
- Check contracts of employment and consider whether you want to put individuals on garden leave and cut them off from IT systems or assign them different duties.
- Carry out a thorough investigation but make sure your investigation and searches are lawfully carried out.
- Collate relevant information and interview witnesses. It might be worth speaking to trusted members of staff to find out if they have also been approached and if so by whom.
- Keep a record of any costs incurred as a result of the investigation and talent raid.
- Keep and review security footage. If your IT team recycles backup tapes, ask them to stop recycling the tapes until they have been reviewed.
- Obtain exit memos/handover lists from any employees who have yet to leave this will help you to identify the current position in relation to key projects and/or accounts and will expedite the handover to their replacements.
- Carry out exit interviews and consider the exit notes carefully.
- Secure and retrieve any computers, laptops and mobile phones that were used by the defecting employees.
Q. What if I suspect a breach?
If you suspect a breach, the first step is usually to ask the employee to give an undertaking – written confirmation they will do/not do specific tasks. If they refuse then an application to court for an order compelling them to act in a certain way or prohibiting them from acting (called an injunction) can follow.
A key defensive tactic in team move situations is to seek an injunction to prevent an employee from working for a competitor whilst on garden leave, breaching his or her post termination restrictions, using confidential information that belongs to your business and to neutralise any unfair competitive edge.
In order to persuade a Court that a post termination restriction is enforceable you need to be able to show that it protects a legitimate business interest and is no wider than is reasonably necessary to protect that interest.
Very senior employees and directors may also owe obligations to act in your best interests. If they breach these obligations, called fiduciary duties, you may be able to get an injunction.
Q. What are “springboard injunctions”?
In the context of team moves, springboard injunctions are pivotal. They are designed to neutralise any unfair advantage or “springboard” advantage that parties may have secured through misuse of information or as a result of serious breaches of their employment contracts or fiduciary duties.
Put simply these Court orders can provide the basis for restricting the individuals from, for example, competing with you, even in the absence of express non-compete or nonsolicitation clauses.
Typically springboard injunctions apply to cases of breach of confidence and breaches of contractual and fiduciary duties, irrespective of whether the restrictions are enforceable or whether they have expired.
1. there are likely to be additional steps peculiar to your industry/market sector that will need to be taken into account; and
2. applications for injunctions need to be made promptly. It will most likely damage your chances if you have waited days or weeks before deciding to do something about it.
What if the boot is on the other foot?
Q. Is it possible to minimise my potential liability when trying to enhance my talent pool through key hires or team acquisitions? In other words, how can I poach staff and get away with it?
If you are considering a team raid it is essential that you seek legal advice from the outset in order to minimise your potential liability and exposure.
There are practical steps that you can take to mitigate the risks such as:
1. Appointing a “recruiting sergeant” ;
2. Reviewing the employment contracts where possible to identify the nature, extent and enforceability of the restrictions, notice provisions and provisions protecting intellectual property (be careful not to review any parts of the contract the employee is forbidden from disclosing);
3. Ascertaining if there is an employee in the team who does not have post termination restraints and could poach the rest when they have started work for you;
4. Keeping written communications with the target employees to a minimum as they could potentially be used in evidence against you;
5. Making a note of the legitimate steps that you have taken to acquire the target employee;
6. Differentiating and ring fencing confidential information so that it is not inadvertently disclosed or used;
7. Avoid sharing and discussing your legal advice with the target employees. They may need their own lawyers. Might you be willing to contribute to these costs; and
8. Finally consider whether there is scope to reach a commercially attractive agreement with the former employer. It could save both time and costs in the long run.
We are seeing more businesses keen to poach key performers in order to enhance their talent pool. Businesses therefore need to know what is and is not legally acceptable.
Against this backdrop the Court seeks to reach a balance between an employee’s right to work and the employer’s right to protect its trade secrets and confidential information.
It is important to bear in mind that each case will turn on its own facts. It is therefore important that you seek legal advice if you are faced with or considering any of the scenarios above.
This is a summary of key points that often arise in relation to team move scenarios and is not a substitute for detailed legal advice. It may contain information of general interest about current legal topics, but it should not be taken as providing legal advice on any of the topics covered.