WorkLife

Our thoughts on the world of employment law - and beyond.

Recruitment – a few tips for the unwary around restrictive covenants and team moves

With recruitment in some sectors having picked up, we have seen employers becoming increasingly rigorous in protecting business interests on departure of key employees.  I therefore thought it was worth a quick recap on sensible steps to take when your business is on a recruitment drive.

Our readers will generally be aware of the law in this area (so forgive me for teaching many of you to suck eggs).   For those who have escaped skirmishes in this area in the past I'll recap the basic legal position. 

As a potential recruiter you'll wish to ensure that you do not ask candidates to break their contractual obligations to their current employer.   In particular:

  • During their employment (even when on garden leave) potential recruits are still likely to be subject to express and implied obligations to their employer, including the duty of fidelity (or loyalty), which is likely to prevent them from carrying out any work for you (paid or unpaid) and will prevent them from furthering your interests to the detriment of their existing employer.  This is likely to include encouraging fellow employees or clients or customers from joining you after their departure from their existing employer. 
  • Candidates will also be subject to obligations of confidentiality which will continue (at least to some extent) after termination of employment. 
  • Finally, senior employees are also likely to be subject to post-termination restrictions, which may include non-compete restrictions (preventing them joining you completely for a period after their employment ends), client restrictions (against soliciting or dealing with clients) and/or employee restrictions (preventing poaching fellow employees). 

It is important to ensure that all those involved in a recruitment process (particularly where it is proposed to recruit a team) are generally aware of the basic rules over what it permissible.  It may be that some of the recruitment process is carried out informally without the involvement of HR, so a few key messages should be reinforced to ensure that managers do not cross lines inappropriately, including the following:

  • Remind managers that they should not ask for information about other team members or about the existing employer's business (eg about future strategy or pipeline work) which is not in the public domain.  Disclosure of this information to you is likely to amount to a breach by the employee of the duty of fidelity and confidentiality obligations.
  • Take extreme care in (and preferably avoid) requesting a detailed business plan as part of any recruitment process where that may well (even inadvertently) disclose confidential or other proprietary information belonging to the existing employer.     These kind of documents may also provide evidence to show that a candidate intends to breach post-termination restrictions (eg if a business plan shows an intention to bring across clients or staff from a previous employer within the time-frame of any covenants). 
  • When recruiting more than one person at a time from the same employer, deal with each of them individually.  Do not use one potential recruit as an intermediary to gauge interest or provide information from other team members and avoid "welcome drinks to meet the team" with a group of potential recruits in order to seal the deal!
  • Warn managers that in the event of a dispute emails and other documents will need to be disclosed and incoming and outgoing telephone calls can be identified.   If possible, you may wish to restrict communications outside formal channels (eg involving HR in communications) although a balance will of course need to be struck between facilitating a successful recruitment and avoiding legal risk. 

You may also wish to consider (in appropriate circumstances) offering candidates access to independent legal advice to ensure that they understand and comply with their contractual obligations.  In some cases, it may be possible for them to challenge the enforceability of some post-termination restrictions, particularly if they are lengthy and widely drafted, but pursue this option with care and only after a proper evaluation of all the circumstances.   Litigation in this area can of course be a real distraction from running a business and is always very time-consuming.     

Finally, your eye at this stage is likely to be on ensuring a smooth recruitment process so far as possible, but do remember the importance of ensuring adequate protection in your own employment contracts in the event of departure further down the line.

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