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24 April 2019
The uncertainties which a merger or acquisition can create often act as a catalyst for team moves, as both employers and employees can exploit the situation.
Therefore, employers involved in mergers and acquisitions must be vigilant and proactive in how they seek to retain top performers and their teams, particularly in the months leading up to and in the immediate aftermath of a deal. Conversely, this kind of activity can result in opportunities for employers to acquire top performers and their teams who may have become disillusioned or felt uncertain about their futures.
For any business to thrive it must protect its interests from competitors. The impact of losing a top performer and their team to a competitor can be extremely damaging. The effect is not normally limited to individual performers or teams but can also result in the loss of:
Such business interests will inevitably have been hard earned over a considerable period and are unlikely to be easily replaced in the short term.
Therefore, it is fundamental to any successful business that effective protections are implemented at the start of employment relationships and maintained throughout. Likewise, employers that wish to turn poacher must proceed with caution and plan the raid carefully to try and minimise the risk of costly and time-consuming litigation.
This article focuses on the measures which employers can take to try and limit the risks and detrimental effects of a potential team move and the steps necessary to plan and execute a successful poaching exercise.
There are several steps that employers can take to mitigate the risk of their employees leaving to join a competitor. Many employers already offer incentive-based remuneration packages which aim to align their longer-term interests with those of their employees. While such long-term incentive plans, together with a clear communication strategy, can assist with retention, employers should actively consider additional measures, such as:
In a team move scenario where one or more employees who work in the same business decide to leave and set up in competition with their existing employer on their own account or join one of their existing competitors, time is of the essence and the existing employer must act quickly and decisively to protect its own business interests.
Once an employer has established that departing employees have acted in an unlawful manner (by breaching either express terms or implied terms of their contract), there are several protective steps that it can take to try and prevent or mitigate the damage. For example, an employer can:
In practice, an important tactical decision is whether to take action against only departing employees or both employees and new employers for the tort of inducing a breach of contract. This is another reason why it is useful to ensure that contracts contain express obligations on employees to draw post-termination restrictions and confidentiality obligations to the attention of prospective employers and inform employers if an offer of employment has been accepted. This may support an assertion that the prospective employer had been notified of the post-termination restrictions.
As is clear from the issues already raised in this article, prospective employers should take care when recruiting senior individuals and teams from competitors. As noted, the primary concerns are that:
However, there are several important steps that prospective employers can implement to try and minimise enforcement action risks and disruption to their recruitment processes, including:
While there are several potential risks which employers can face at the hands of former employees, these risks can be significantly mitigated provided that they are:
Likewise, for poachers, while the stakes are inevitably high, it is possible to significantly reduce litigation risks and achieve the desired outcome, provided that the poaching exercise is carefully planned and executed.
For further information on this topic please contact Michael Hanson or Jay Webster at Carey Olsen Bermuda by telephone (+1 441 542 4500) or email (firstname.lastname@example.org or email@example.com). The Carey Olsen Bermuda website can be accessed at www.careyolsen.com.
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