When Competitors Steal Staff There Are Legal Consequences

Get in touch: 1800 770 780

How can we help?

Stealing or poaching staff is a common phenomenon in the business world. To win work or obtain confidential information of their competitors, many rival employers look at recruiting key staff from other businesses, which are expected to bring clients with them. This can have a devastating effect on businesses when then staff are poached by competitors. Though you cannot stop a rival making an offer to your staff, you can nevertheless reduce the likelihood of your staff accepting such an offer and taking your clients with them.

Some Techniques to Reduce Poaching of Staff

In employment law, a proactive approach to prevent stealing or poaching of staff is simply to keep them happy. Building a close relationship with your key employees and having regular meetings to discuss and deal with various employment issues would definitely lessen the chance of poaching. Moreover including trade restraint and confidentiality provisions in the contract of employment can also help in minimising future issues. A brief description of each of the provisions is given below:

Trade restraint and confidentiality: You can use trade restraint clauses to protect your business interests. Restraint of trade clauses attempt to regulate an employee’s conduct while they are still engaged in the employment relationship or a former employee’s conduct once the employment relationship has ended. Some common restraint of trade clauses you may include are clauses:

  • Restraining your employee from engaging in work for your competitor in a particular geographic area and for a particular period;
  • Restraining a former employee from disclosing confidential information after the expiry of the employment relationship; and
  • Restricting an employee from poaching any other employee to work with your competitor.
  • Garden Leave: You can also direct your employee to go on ‘leave’ during their period of notice. When the employee is on ‘leave’, they continue to be employed and paid but you can direct him not to attend work or contact any of your clients or employees. This way the employee will be bound by the duty of fidelity and good faith which may provide some protection for your business.

Legal Consequences for Stealing Staff

Where there is a breach, sometimes the threat of legal action can be enough to prevent your employee from going to work for a competitor. You may also consider enforcing a restraint of trade against your employee through legal proceedings. You may obtain an injunction to prevent the employee from working for a competitor for the duration of any non-compete covenant, damages or an account of profits. Any action must be taken without delay. In circumstances where your competitor has encouraged your staff to breach an employment contract, the competitor may be liable in tort for inducing a breach of contract by the said employee. Subject to availability of evidence, you may commence proceedings against both the employee and their new employer for breaching the contract as well as for inducing and encouraging such breach. The Court, before granting an interlocutory injunction shall consider the following issues:

  • Whether the application for interlocutory relief has been made within the prescribed timeframe;
  • Whether there is proper evidence of breach of the trade restraint clause(s) by the employee;
  • Whether the trade restraint clause included in the employment contract is reasonable. If the Court finds that the trade restraint clause is too broad and wide in scope, it can reduce the restrictions applied by the clause;
  • Whether the balance of convenience lies in favour of granting injunction to the employer. The Court should be convinced that an *Injunction Order is necessary so as to maintain status quo; and
  • Whether damages are an adequate alternative remedy to the granting of an injunction. In such situation, you need to show that receiving compensation or damages is not adequate to remedy the breach of the restraint.

As an employer you need to prove to the Court the risk of future losses and the imminent harm that might be caused to your business owing to the employee’s breach of contractual restraint. The fact that your company may have lost business as a result of a purported breach of an employee’s contractual restraint may not be sufficient for interlocutory relief to be granted as the loss has already occurred.

Owen Hodge Lawyer can assist and advise you on the appropriate steps your business should take to avoid any negative impact on the business.


Talk to Owen Hodge Lawyers

Owen Hodge is here to help.

Get in touch now