3 Oct 2016
The recent case of Tullett Prebon plc v BGC Brokers LP has highlighted once again the dangers of getting a team move wrong. Both BGC and the team looking to move to BGC came under heavy criticism from the court which held that they had shown a blatant disregard of the law and of employees’ duties. Among other things, the court found BGC liable for unlawful conspiracy and inducing a breach of contract.
So, what lessons can be learned from this case and what should a poaching employer do to stay on the right side of the law? As a starting point, the following should be borne in mind:
- Consider approaching a recruitment consultant to assist at arm’s length with the recruitment process. This is less likely to lead to a breach of duty by the team members or to a leak of information.
- Ask for copies of the team members’ contracts of employment and pay particular attention to their job descriptions, express duties during employment and any post-termination restrictive covenants which are mentioned. Do remember, though, that post-termination restrictive covenants will not be enforceable if a court decides they are too wide and go further than necessary to protect the employer’s legitimate business interests. If in doubt, take legal advice on the enforceability of such restrictive covenants.
- Consider what types of confidential information the employees hold and whether they might be free to use any confidential information after the termination of their current employment. Again, check the employees’ employment contracts to see if there are any post-termination restrictions regarding use of confidential information – if there aren’t, the employees will only be prevented from using confidential information which amounts to trade secrets or such equivalent information. Also, team members will be free to use information which has become part of their own skill and knowledge.
- Avoid creating any damaging evidence of misconduct which could be discloseable in subsequent court proceedings. Remember that, in addition to emails and hard copy documents, text messages, Bloomberg messages, facebook messages and other instant messenger communications could fall within the scope of the court and tribunal disclosure rules.
- To minimise the risk of being held liable for unlawful conspiracy and/or inducing a breach of contract, remind prospective employees of the need to comply their legal obligations. If you do become aware of any breaches of duty by the team members, do not take advantage of them.
- Be aware that, in addition to their express contractual obligations, employees also owe a number of implied duties to their employer, including an implied duty of trust and confidence and an implied duty of good faith and fidelity. Recent cases have confirmed that the implied duty of fidelity can require employees to disclose approaches made by competitors and/or unlawful conduct of which they become aware. This is, however, a grey area and the obligation to report a team move is likely to depend on the seniority of the employees involved and the possible damage that could be caused to the employer’s business by the team move. The more senior the employees and the greater the impact on the employer’s business, the more likely it is that there will be an obligation to inform the employer of the planned move.
- Senior employees and directors will also owe fiduciary duties to their employer. Such duties include a duty to avoid being in a position where their personal interests conflict with their loyalty to their employer, a duty not to make a secret profit from the employee’s position in the company and a duty to disclose an employee’s misconduct.
- If you find yourself threatened with court proceedings including injunctive relief, consider whether an acceptable compromise can be reached with the victim employer to avoid the cost and risk of litigation. It may be possible to provide sufficient comfort to the affected employer by giving various undertakings, for example, by agreeing for a specified period to place the moving team in areas of your business which do not compete directly with the victim employer or by agreeing that the individuals will not work for certain named clients.
