How to Avoid the Legal Pitfalls of a Team Move
17 July 2014
This article, written by Catherine-Ellen O'Keeffe, first appeared on Independent.ie on 10 July 2014. © Copyright Irish Independent 2014. All rights reserved. To view this article as it originally appeared, click here.
The success of a company is often connected to the specific knowledge, skill and connections of its key employees. It is, therefore, not uncommon for a company to recruit a whole team of employees from its competitors.
For instance, a company may try to recruit a manager from its competitor and also make enquiries with that manager to see if other members of their team would like to join.
Until recently, disputes between the players involved in a team move have been relatively infrequent in Ireland.
However, with signs now of an upturn in the economy, the risk of talent flight is increasing. So what can a company do to try to avoid being held responsible for any losses suffered by the former employer? Equally important, the team itself needs to be aware from the outset of the legal risks associated with the move taking place.
They too could be held responsible. The reality is, however, that if a team is already on the move before a strategy is in place, it is often too late to limit the legal exposure for the players involved.
There are a number of different ways in which the recruiting employer and team of employees can take action to avoid the legal pitfalls.
• Consider putting in place a strategy to help ensure the move takes place in a discreet manner.• Appoint a recruitment agency to assist in the recruitment of the employees to act as the intermediary in the recruitment process.
• Request copies of the team members' contracts of employment and review the team members' terms and conditions of employment. Consideration should be given to the seniority and duties and responsibilities of the employees; any restrictive covenants in place, and duties of confidentiality towards their employer. This analysis will enable the company to assess what steps the team members can take to prepare for the move without breaching their obligations towards their employer. It will also help defend any allegations of inducing a breach of contract or conspiracy on the part of the company.
• Remind the new team members of their responsibilities towards their employer in writing.
• Be careful when communicating about the team move internally and with the prospective team of employees. In the event of legal action being brought, an order for discovery of all relevant documents between the company and the employees could be obtained.If proceedings are brought, the competitor should obtain separate legal advice to the team members.
• As an employee who is part of the team moving to the new employer, an employee should understand their duties and obligations to their current/former employer.
• Consider the appropriate time to resign from your position. If you are a senior employee, you may be considered "a fiduciary" which can give rise to additional obligations towards your employer.
• Avoid unsafe methods of communication. In the event of legal action being brought, an order for discovery of all documents received from the employees could be obtained. In one UK case, an employee lost eight Blackberries during the period in question. The court found that at least some of these had been deliberately lost.
• Avoid holding group discussions in secret. UK decisions have shown adverse inferences being drawn where there is evidence of an intention to organise group discussions with the intention of hiding them from the employer.
• Avoid disclosing confidential information to the recruiting employer.
• Avoid creating evidence of an "early exit plan" and using project names, particularly self-descriptive ones. "Project Phoenix" was coincidentally used in two recent UK cases on team moves. The allusion to rebirth out of ashes was noted in both cases.
For the company which stands to lose one of its most valuable assets, an entire team of employees, the best way to reduce the impact of a team move on its business is to have express clauses in place in the employees' contracts of employment.
Without such clauses, it can prove difficult for a company to take legal action against the employees and the recruiting employer.
The content of this article is provided for information purposes only and does not constitute legal or other advice. Mason Hayes & Curran (www.mhc.ie) is a leading business law firm with offices in Dublin, London and New York.