Team moves: can they be prevented? -Kuits Solicitors Manchester
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Team moves: can an employer’s worst fear be prevented?

Team moves: can an employer’s worst fear be prevented?

24th June 2022 - Published by

There are few acts more damaging or more feared by employers than a so-called “Team move”. It is bad enough if your star employee resigns to set up in competition or join a main competitor – if they do so in conjunction with other key employees this can have devastating implications for the business.

A typical scenario is where one or more senior or influential employees decide to leave and join a competitor. Whilst a start-up may not be able to afford to take on a team, an established competitor would see obvious value in acquiring a ready-made business unit, and their associated market knowledge, skills and connections. Often the “carrot” offered by a new venture is the promise of equity or share options in return for a lower value starting package.

How do team moves occur?

Team moves can happen quickly – where employees resign together and at the same time, or over time where key players leave, and others then follow in a steady stream.

An orchestrated resignation where all go at the same time can be a clear sign of a pre-planned team move. Other common signs are:

  • employees showing a sudden interest in their contractual terms;
  • attending unscheduled or irregular meetings;
  • communications from head-hunters who are appointed by the poachers to detract attention from their unlawful actions;
  • communications between certain colleagues taking place more intensely or at unusual times or locations;
  • the gathering of confidential business information for ostensibly legitimate purposes.

Can you prove employees have been poached?

It is not unusual for the “recruiting sergeant” to be an ex-employee who is not subject to any post-termination restrictive covenants including anti-poaching clauses to prevent them from soliciting or enticing away their former colleagues -perhaps because such a clause was not included at all, or was included but is unenforceable. Sometimes things slip through the net; contracts are not signed, or they are not reviewed and revised following promotions. If no contractual provisions are in place, then provided they did not misuse confidential information or act in a way which encourages the target employees to breach their contracts, they may be free to poach at will.

The battle often lies in proving collusive behaviour in breach of contractual and fiduciary duties– of which there will usually be an obvious and clear inference depending on the timing and manner of the departures, but may be little actual evidence. Planning and executing such a move will inevitably involve a breach of contract at some point along the line – particularly in the case of more senior employees who owe fiduciary duties.

Fiduciaries, those who hold a legal or ethical relationship of trust with the organisation, owe duties of single-minded and exclusive loyalty to the employer extending so far as to require them to disclose plans to leave in order to compete. These duties can provide valuable remedies to a business.

What should you include in your employment contracts to prevent this?

A well-drafted contract will contain terms to prevent an employee from taking steps to set up in competition during employment and to put a strangle-hold on what the employee can do- other than their role- by bolstering the implied duties of good faith and fidelity. It should go further in requiring an employee to use best endeavours to protect the business and to disclose any wrongdoing – including intention to compete-on their own part or by another employee.

There will be a close interplay with the terms of any post-termination restrictive covenants within the contract. In the absence of these, or if the covenants do not extend to including an enforceable restriction on competing with the business, then the breach of contract provides remedies including a “springboard injunction” where a court can make orders designed to nullify the competitive advantage gained by the unlawful conduct – which could include an order not to trade in competition for a defined period, or to work with the colleagues involved.

To bolster its protection against Team moves, an employer should first ensure that it has in place a comprehensive and well-drafted employment contract, tailored to the employee’s own role and seniority, their duties, and competitive threat. An express anti team move  clause can be included to prevent employees joining an ex-colleague. These so-called “no-muckers” clauses have yet to be properly tested in the courts and so there is no basis to deny that they would be enforceable, aside from the benefit of their potential deterrent effect.

Next steps if a team move has occurred

If a team move materialises, an employer will need to conduct a prompt and thorough expert investigation, which may entail suspension of those involved, a forensic analysis of IT and communications devices, and exit interviews. Where evidence is thin on the ground it can be in the employer’s interest to target one member of the team to persuade them to stay on enhanced terms and on the basis that they give away vital incriminating evidence against the others. There is no doubt that the departing employees will be looking for any reason they can to claim breach of contract against the employer on the basis that this would release them from their contractual obligations and restrictive covenants. Going into an investigation too heavy handed or rushing to dismissal can have undesirable consequences.

Within the employment team at Kuits, we have built up a depth of experience advising businesses and employees in team move scenarios, to be able to provide advice on protecting against team moves, and what legal action can be taken to neutralise or provide recompense for the damage that has caused. The team has developed a Business Protection package which is specifically designed to help employers minimise the threat to their proprietary interests posed by a team move.  Importantly, this also helps to protect the value of the business assets (and, if a sale of the business was ever contemplated, it is likely to prove very attractive to potential buyers).  The package includes:

1. In depth analysis of key business interests and people
2. Identifying any weaknesses in your existing business protection from employee competition
3. Drafting bespoke contracts for key talent
4. Preparing explanatory business case to explain and justify the extent of the new contractual restrictions
5. Advice on other practical steps to take to protect your business
6. Advice on implementation of new restrictions

Get in touch with an Employment advisor today 

Please contact Employment law Partner Sally Bird on 0161 or email sallybird@kuits.com for more advice on team moves, our Business Protection package or any other contractual advice on employment.

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