PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
Poaching of key staff is a perennial problem for service companies.
In a recent dispute between two insurance broking firms, a firm which had the bulk of a specialist insurance team ‘poached’ by a competitor went to court to prevent the rest of the team joining their former colleagues, after an offer from the competitor to ‘buy’ the team was rejected.
When the firm faced mass resignations, it sought an injunction to prevent its competitor from recruiting the rest of the staff who worked in that section.
In spite of evidence that several senior employees had breached their contracts of employment, the court considered that since the team leader and the main revenue earners had left, the injunction should not be granted as the damage had already been done.
The firm whose employees had been poached appealed against that decision.
The Court of Appeal considered that such a wide-ranging injunction could only be granted in exceptional circumstances. Whilst it was important to give the firm a degree of continuity of staff to enable it to do what it could to repair the damage to its section, it was only appropriate to grant a short injunction as an ’emergency relief’.
Says Wendy Davidson “In practice, the appearance at the Court of Appeal will have achieved relatively little other than incurring substantial costs. A better outcome might well have been achieved by the inclusion of strong but enforceable restraint of trade clauses in the employment contracts of the company’s employees.”
For advice on how to protect your business from having key members of staff poached by competitors, or on how to counteract other unfair business practices, contact us.