Race for talent heightens risk of ‘team moves’

Out-Law News | 07 Jun 2022 | 8:57 am |

Jon Fisher tells HRNews about minimising the risk of competitors poaching your best talent
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  • Transcript

    They call it ‘The Great Resignation’. The economy is picking up, there’s a recruitment drive across most sectors and people are on the move. The latest research suggest 7 in 10 employees would be willing to change jobs in the next few months. But what if you are directly affected by this? So, not just losing one or two individuals, but perhaps a whole team and, with it, a big part of your business. Perhaps your shrewd competitors are looking to poach ,your key employees, or entire teams, to boost their own recovery. So how can a business protect itself against that threat? To help with that, I phoned Leeds-based Jon Fisher. I started by asking Jon what we mean by a team move:

    Jon Fisher: "That is where one of your competitors comes and takes not just one of your employees but tries to take a whole team out of the business. That is damaging for two reasons. One, of course there is more client loyalty where a whole team moves and it is easier to transfer the clients and it is effectively like a competitor trying to steal a whole chunk of your business. The second is of course it severely damages your ability to actually service the work that you've got - it might be that the clients are not particularly loyal to that team but actually you've got nobody left to do that kind of work anymore so they have got no option but to go elsewhere, so it is really damaging for a business. There are a lot of things that you can do to try to protect yourself against these moves. The first is identifying who those teams are that are particularly key and may be vulnerable to being poached because of the market conditions and just making sure that they are generally happy and have no cause to be looking around. If there are disputes about bonuses or grievances or niggles about salary reviews then those are the people of course who are high risk and you need to be keeping a close eye on them. Sorting out those kinds of issues with those sorts of people is the most practical thing you can do, keeping people happy, because ultimately that is what you want, you want to keep the team. The legal process can't really keep  the team for you, all they can try and do is limit the damage that the team leaving does, so it is very much second best to keeping the team onboard and keeping them happy. The other thing you can do of course is just to review your contractual protection that you've got with these individuals so trying to ensure that the contractual protection there is such that if they did try and leave you've got the maximum levers to try and stop them damaging the business by taking clients, taking fellow employees alongside them. It's not just standard restrictive covenants, the ones that say you must not work for a competitor for 6 months, you must not solicit our customers, there are other more subtle things that you can put in there around coordinating the team move, about obligations to disclose an intention to leave to move to a competitor, obligations to disclose the fact that one of your team is leaving to go to a competitor. Those kind of things are quite subtle and you wouldn't typically see them in a contract, but particularly within the financial services industry they are becoming more standard and those are the kind of things which you can look to put into a contract now for new starters certainly, but also say at pay review or bonus time if you are introducing variations to terms you may want to put those in for your key people to make sure that they are not vulnerable to being lifted out by a competitor."

    Joe Glavina: “What if you become aware that a team might be leaving?”

    Jon Fisher: “If you become aware that a team is leaving, of course, there are things that you need to be doing. One of the considerations will be whether you put the team on garden leave. And clearly there may also be some disciplinary investigation, if you suspect somebody has been guilty of trying to coordinate a move. One thing you need to be really careful about in conducting that investigation if you don't give anyone cause to claim constructive dismissal, because if you breach the term of trust and confidence or any of their other expressed terms, for example, by withholding bonus or commission, then that can give them the right to say they've been constructively dismissed, and they walk away free of all contractual protections. So that's always a delicate line to walk. If you want to go through the legal process, you need to act very quickly, as well, as you need to get your legal advisors on board early. Because if you want to go for an injunction potentially that's something that you need to go for. straightaway. It's not something you can wait around for. So always act quickly if you believe there is a team move.”

    Joe Glavina: “Can I ask you about the ‘flip side’ Jon? So what if you are the business acquiring the team?”

    Jon Fisher: “So again, you need to take legal advice right at the start if you are thinking of taking on a team and proceed really carefully in terms of how you go through it because the legal proceedings can be such that the cost of those and the orders that can be made can in effect make the whole exercise worthless to you because they can take away all of the benefit you gained from taking on the team. So it is really worth taking on that expert advice and making sure you follow the right strategy so that the team can land in the best way possible so they can do what you are recruiting them to so which is bring in the business and increase your revenues.”

    Joe Glavina: “So what are the things HR needs to be aware of when a team is coming across to you?”

    Jon Fisher: “From an HR perspective, when you're bringing in a team, one thing they will need to be really aware of is what are the restrictions that these people are operating under? So what are the contractual restrictions? Are there any undertakings they've given to their previous employer? How do we as a business make sure that they comply with those undertakings because if they don't, and we're asking them to do things that they're contractually not allowed to do, then we the business can be liable for having induced that breach of contract. So as part of any induction process and ongoing monitoring, it’s about making sure there's absolute clarity about what they're allowed to do and what they are not allowed to do and then, if there are any breaches of that, as a business, led by HR, you need to decide what action are we going to take here because these people are exposing the business to risk and we've told them not to do that?”

    Joe Glavina: “Final question. You make the point about how team moves can be very damaging to a business, very expensive. Tell me about that”.

    Jon Fisher: “I think particularly in the financial services sector this is a massive issue for some of our clients. Teams walk away with books of business worth millions and effectively close down an entire line of business for a client because the entire team leaves and they may be a very rare talent, knowledge and skill-set within that industry and if they leave and take the book of business with them that can be almost impossible to replace, particularly given the difficulties of taking on a team yourself. So this is a massive issue, this is millions of pounds, this is all stuff from the bottom line being taken away so it is well worth putting in place these preparatory steps to try and stop that happening."

    A good example of how restrictive covenants can be used to protect the business against the risk of team moves is the recent case of RBH v Brooks and Sambrook. In that case two key individuals plotted together before resigning to set up a business in direct competition with their former employer. In the end the employer was able to take action and enforce the restrictive covenants. We covered that in some detail in this programme in: ‘RBH case shows value of restrictive covenants as enforcement succeeds ‘in entirety’’. We’ve put a link to that in the transcript of this programme.