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Corporate Investigation
Staff Poaching

Staff Poaching

Employees are your lifeblood - easily poached by a better offer or from within

A Key employee leaving your business can cause you a considerable loss, not only in replacing them, but in replacing the value and business they created

An employee leaving to set up in competition and poaching staff, whether they declare this or not, will cause you a greater loss

An employee leaving, setting up in competition, and attracting other employees to leave and join them, may be catastrophic

We have frequently had cause to investigate such issues, minimising or preventing the loss occurring

In a recent legal case - UBS Wealth Management (UK) Ltd and another v Vestra Wealth LLP and others - the Court considered whether or not to grant a so-called "springboard injunction" where a former UBS employee, a Mr Scott, had set up a rival business to UBS, his former employer, and then coaxed 75 UBS employees from core desks to join him in the following weeks. There is a general rule that employees are free to leave their employers to set up in competition either individually or as a group. there are, however, several potential legal pitfalls to effecting a "team move", particularly:

  • if the defection is co-ordinated from within by a group of employees acting secretly, this will usually amount to a breach of the implied contractual duty of fidelity;
  • where the employees in question occupy positions of responsibility their actions may constitute implied duties to report the wrongdoing of others to the company;
  • those defecting might take confidential information, e.g. client contact lists, with them, which may amount to the tort of conspiracy
  • In principle, it is not unlawful to poach a competitor's employees. However, should the competitor's employees assist the poacher while themselves still employed - e.g. by helping to persuade staff to leave with them in secret - the poacher may commit the tort of inducing the competitor's employees to breach their contracts, as well as participating in any conspiracy. Where one or more employees have left their employment and set up in competition with their former employer, that employer will usually seek to rely on restrictive covenants in their contracts and to restrain the use of any confidential information

    This has led to the development of the springboard injunction which derives from the case of an employee who had stolen a list of his employer's customer contact details before leaving to set up in competition. The Court granted an injunction restraining him for a limited period from doing business with any of the customers on the list. This was granted even though many of those customer's names and addresses were already in the public domain and not, therefore, confidential information. The springboard injunction is used to prevent an employee using their earlier wrongdoing as a commercial advantage against their former employer

    In the UBS case, the Court agreed with UBS that the defecting staff, including senior managers, had colluded in secret to persuade staff to leave and co-ordinate the departure of other employees from within, causing the employees to breach their employment contracts, induced others to breach their employment contracts and participated in an unlawful conspiracy. The Court considered it "inherently unlikely" that whole departments would leave UBS to join Vestra without having discussed the matter amongst them at length beforehand

    It was "overwhelmingly likely" that the defectors would have been given assurances that all or nearly all the other members of their teams were going to defect and take their clients with them, thereby negating the risk of leaving an established organisation for a fledgling rival. It was also overwhelmingly likely that this could only have happened with the "active and knowing encouragement and assistance" of many of the defectors including the four employee defendants. There was also evidence that Mr Scott himself knew what was going on and had encouraged it which, if proved, would make him a party to an unlawful conspiracy

    The court granted an injunction prohibiting the defendants, until judgment at the end of the trial from:

  • doing business with any client of UBS to whom any employee on the poached desks had provided services during the past 12 month (this did not include clients who had terminated their arrangements with UBS before issue of proceedings);
  • inducing, encouraging or persuading any such client to transfer business away from UBS:
  • soliciting or enticing any existing employee to leave UBS
  • Of particular significance is that the Court held nothing could be done to prevent Vestra dealing wth clients who had already moved over from UBS before proceedings were issued; they could not be compelled to go back to UBS. However, it pointed out that those clients should not be serviced by former UBS staff in breach of any continuing restrictive covenenants - it remains to be seen what effect this has on the relationships between Vestra and its newly accquired clients

    We will be pleased to advise and help your company should you be facing a potentially similar issue; further information can be seen in the accompanying pages relating instances of materials theft and staff poaching

    Employees & HR

    Sickness & Absenteeism

    Staff sickness, supported by a Fit Note, may be abused. Employees may fraudulently take extended sick leave or unauthorised absence

    Employment Tribunal

    Employment Tribunal

    We have helped many companies to resist or win employment tribunals, particularly if there is suspicion of fraudulent or unfounded claim

    Moonlighting Employees

    Moonlighting Employees

    Most full time employees are required to work for you only - some will moonlight, in a similar industry or in their own parallel company

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