GUEST COMMENT: How to stay legal during a team move
Now that bonuses have, for the most part, been paid, and hiring is picking up again, we're seeing a noticeable increase in the number of team moves that are taking place in the City.
The motivation for these moves is clear. People are taking stock of their careers. Some, who stayed put during the recession, are now looking for new employers and new opportunities; some teams are frustrated by the weight of additional compliance procedures in larger
banks, and want to move to smaller firms; others simply feel it's time for a change. From the organisation's perspective, there's a new confidence, and investment in a team allows a more rapid response to business opportunities than a slow build out, person by person.
Everything would be fine, were it not for the fact that team moves throw up legal issues. These can create big problems, both for the team members who are moving, and for their new employer.
Restrictive covenants, confidentiality, garden leave, and conspiracy
Most employment contracts in the City now contain restrictive covenants and confidentiality and garden leave clauses. These prevent employees using and taking away confidential information (eg lists of employees/clients), and dealing with clients or hiring former colleagues for a period of time post termination; also employees can be forced to
stay at home out of contact with colleagues and clients during the notice period (so-called, 'garden leave.').
In addition, employees owe an implied duty of "good faith and fidelity" which prevents them from encouraging other employees and clients to leave their current employer in order to join them in a new firm.
In some cases the courts have gone as far as to declare that this duty requires employees to inform their current employer of approaches by competitors and of any unlawful poaching committed by colleagues.
Another recent and somewhat surprising development is the willingness of the courts to find companies and employees liable for conspiracy when working together to extract a team (plus associated business) from another firm. The key remedies that the "raided firm" can seek are damages for loss of business and profits and an injunction for a period
of time to restrain the poaching firm from taking on all the staff and taking over the clients.
Weighing and mitigating the risks
Frankly, it's now very difficult to remain within the law during a team move. In many cases, therefore, a calculated risk is taken: does the employer from whom the team is being poached have any appetite for costly and public legal action to remedy the damages?
The risk of legal action can be mitigated if the team leaders go first and the others follow, entirely on their own initiative, or when the team leaders are free of restrictions. Another approach is to use headhunters to recruit the entire team - however, this only works if the
team leaders aren't involved in encouraging subordinates to move, something which isn't usually possible.
Alternatively, everyone can resign simultaneously. This is very provocative, but it can be difficult to prove who solicited who, and once people have actually resigned the courts may be unwilling to impose an injunction that prevents them from joining the employer of their
choice.
Once a move has actually taken place, a willingness to abide by legal restrictions on dealing with clients will reduce the likelihood of further legal difficulties.
Team moves are a risk. The latest team move case to hit the headlines is that of Tullett Prebon v BGC, in which BGC were subject to an injunction preventing the further hiring of Tullett's staff and may eventually have to pay substantial damages to BGC.
