The Recruitment Process
Recruiting a team from a competitor has become an increasingly risky thing to do. Legal advice should be sought and poachers should avoid creating evidence of a targeted plan to poach a team from a competitor so that any such plan cannot be traced via telephone records, emails or text messages. Remember that home emails and personal texts are also discoverable. Also bear in mind that the world that judges live in is unlikely to reflect the world of teams on the move!
A business should take a number of steps to provide itself with the greatest protection:
- Appoint headhunters to act as a third party.
- Request copies of the team members’ employment contracts and remind the target team members of their responsibilities.
- Take extreme care over the way you communicate.
A) Appointing Headhunters
This is an attempt to act at arm’s length. Rather than having a member of the target team assist in recruiting other members of the team, poachers should appoint a headhunter to manage the communications with the target team members. This reduces the level of direct involvement of members of the target team or an individual who has recently left that team and the risk that the planned move will leak.
The headhunter should be instructed to seek out other candidates and not just approach the target team members. One headhunter should be instructed so that that headhunter can confirm to the targets that other employees in the team have been approached and are moving.
In practice, it is common for a senior individual to leave a team, move to a new employer and then (in breach of his/her post-employment restrictions) assist the new employer in hiring the rest of the team or specific individuals from that team. That individual should have no direct contact with the headhunter or members of the target team – those communications should be managed by an individual who is free of post-employment restrictions (e.g. the company’s normal resourcing department).
B) Review the Targets’ Contracts of Employment
As early as possible during the recruitment process, the poacher (or preferably the headhunter on the poachers’ behalf) should ask for copies of the team members’ contracts of employment, job descriptions, experience, etc. The employees may be forbidden from disclosing certain parts of their contract, including remuneration details. If this is the case the poacher should not seek out those details until absolutely necessary (i.e. at the point of making an offer). Ideally, the poacher should not request prohibited details at all, but in reality few employers will make an offer to a target employee without knowing their current remuneration. Also remember that employees who ask their HR department for copies of their employment contract will look suspicious.
Having sight of the target employees’ contracts will enable the poacher to assess what the employees can do when they join without breaching any of their post-employment restrictions, how long they are prevented from approaching certain clients, etc.
The poacher should also ensure that the headhunter gives the target employees detailed instructions on what they can and cannot do under the terms of their contracts. This reduces the risk of the planned move becoming unlawful and, in particular, helps to protect the poacher against the accusations that it has encouraged a target employee to breach his/her contract.
C) Communicate Carefully
The key to achieving a successful team move and minimising the legal risk is to avoid the creation of damaging evidence. This extends to communications:
- internally;
- with the targets; and
- with the headhunter.
Written communication is particular dangerous, especially emails. The top tips in terms of communication are:
- avoid emails from the poacher or the headhunter to the targets’ work email addresses – it is easy for the current employer to access these email accounts and to recover deleted emails;
- avoid telephone calls from the poacher or the headhunter to the targets’ work telephone number or work mobile number – employers are able to monitor phone calls and retrieve phone records;
- avoid text messages from the poacher or the headhunter to the targets’ work mobile number – these can be retrieved by the current employer fairly easily;
- avoid communication about the move between the targets on their current work email addresses, work phones, Bloomberg, etc.
Although far less convenient. communication should be done orally to targets’ personal phone numbers outside of office hours. Ideally, communication should be handled by the headhunter. The targets should have as little communication amongst themselves about the move as possible. Remember, however, that one slip can create a potential minefield as all personal email/texts and phone/computer communications could become discoverable. Also “losing” BlackBerries or phones is a potentially risky course to take because of the inferences that will be drawn if legal action ensures.
Conversely, the poacher should document the steps that they have taken to acquire the team members by lawful means (e.g. job adverts, mandates to headhunters), as this can help demonstrate that the recruitment is legitimate and dispel any suspicion of wrongdoing.
Managing the Resignations
Nothing will raise greater suspicion than most of all of the targets all resigning on the same day with identical or very similar resignation letters/emails.
To avoid suspicion:
- ensure that the targets resign on different days over a period of time, possibly as they each get to the end of the recruitment process;
- do not provide a set resignation letter or script for the resignation meeting – each target should just prepare their own short and basic resignation letter;
- ensure that the targets do not reveal who they are joining.
Enforceability of Restrictive Covenants
In terms of what the targets can do when they join, the poacher should assess what scope there is to argue that the targets’ post employment restrictions are unenforceable:
- Are they too restrictive and therefore void?
- Are they protecting a legitimate interest?
- Can the poacher show that the employees are not involved in work which is competitive and/or could use confidential information compared to what they were previously doing?
- Can it be argued that any members of the team have been constructively dismissed?
This approach needs to be measured as the courts will not look favourably on employees who have deliberately overstated issues as a tactic to try to secure their release.
If the restrictive covenants are enforceable, the poacher should seek to ensure that they are observed by the team members.
Confidential Information
The poacher should check the employee’s contractual confidentiality obligations to determine what restrictions apply and identify which information acquired by the team members in the course of their employment with their current employer is confidential.
Avoid using confidential information so as to reduce the potential loss that the previous employer can claim. In particular, the poacher should ensure that they do not upload confidential information belonging to their old employer onto its computer systems. The uploading/downloading of confidential information will be discoverable in any legal proceedings.
What is the Desired Outcome?
Consider a settlement strategy – is there an acceptable compromise position that could be offered to the former employer that would avert the costs and risks associated with litigation, while enabling the employees to get on with at least some work?
- What undertakings might be acceptable?
- What is the former employer most concerned about?
- Is the concern valid and, if not, is there anything undertaking which can be given to reassure the previous employer that its world is not about to collapse?
- Would undertakings to refrain from working for particular named clients for a period of time assist?
- Would an undertaking to keep out of a particular market help?
- An undertaking to refrain from approaching other employees of the former employer might be less attractive in the circumstances but may be work offering.
Litigation
If legal action is threatened or brought by the team members’ former employer, there may be a conflict of interest between the interests of the poacher and the interests of the team members, and therefore it will often be advisable for the team members to have separate legal representation.
If separate representation is the chosen route, meetings between the company’s lawyer and members of the team should generally be avoided as such meetings may not attract legal professional privilege, although they may benefit from common interest privilege. If common interest privilege is being relied upon, it is sensible to document the arrangements in a common interest agreement, to ensure that the parameters are fully understood.