Team moves

Tue, 15 Jun 2010

Recruiters are often involved in ‘team moves’. These can result in legal action.

A team move occurs when two or more employees leave their employer for a competitor. Senior managers often seek to bring their rising star(s) with them when they move roles. This can involve some degree of co-ordination between the departing employees and the new employer and/or any recruiter that is involved.

The loss of a team can clearly cause significant damage to a business. For this reason the “old” employer often turns to the courts to prevent the immediate impact of such a move. All parties need to be aware of the legal issues involved before considering a team move.

What is ’unlawful’ conduct when a team moves?

Unlawful conduct includes breaching the departing employees’ employment contracts. It can also include “inducing” or encouraging the breach. This means that the new employer or even the recruiter could be liable if they facilitated or persuaded the employee to breach their contract. Look out for the following clauses in the departing employees’ employment contracts:

•        confidentiality;
•        non-compete obligations;
•        clauses preventing soliciting/dealing with clients;
•        clauses preventing an employee from poaching or working with colleagues; and
• directors and senior employees may also owe their old employer a duty of good faith and fidelity which could prevent them persuading their colleaguesfrom moving with them.

This is not an exhaustive list. The team’s individual employment contracts should always be consulted.

What can the consequences be if there is unlawful conduct?

The former employer may seek:

•      an injunction to prevent the team from working for the new employer;
•      to recover confidential documents from the team
•      to recover loyalty bonuses from the team; and/or
•      to recover compensation from the new employer/recruiter for inducing breach of contract or conspiracy. The risk of this depends on the level of pressureapplied by these organisations to persuade the departing employees to leave their former employer.

Practical tips for managing a team move

1)   Be aware of the legal obligations the employees are subject to

Ask for a copy of their employment contract and/or service agreement. Consider further implied duties that could apply. Note the dates when the employment and post-termination restrictions will end.

Post termination restrictions are only enforceable if they are protecting a legitimate business interest and are reasonable. If a restriction seems unfair (e.g. applies to a sector/geographical area in which the former employer does not compete), it is unlikely to be enforceable.

2)   Treat garden leave carefully

It can be easy for an employee serving their notice period at home to forget that they are still an employee of the employer. During “garden leave” the employee usually remains subject to all of the obligations that applied prior to the “leave”. As such, the risk of committing “unlawful” conduct is likely to be higher during garden leave.

3)   Considering the scope of the restrictions

Once relevant documentation has been reviewed and the risks considered, it may be possible to design a short term role to avoid breaching the restrictions for the length of time that they apply. 

4)    Appointment of recruitment agency

Involving a recruitment agency experienced in team moves will help to protect the new employer from some (but not all) legal claims.

Hayley Johnson, Solicitor, law firm Brodies