Poaching senior hires from competitors is nothing new in the fashion world. The moves of Jigsaw’s chief finance officer, Claire Wain, to Jack Wills and Liz Evans, the chief executive of Oasis and Warehouse to Fat Face, are two recent examples. It can be a great way of maintaining an edge over the competition in a hugely competitive environment, and attracting new people with a proven track record. However, it is fraught with legal and reputational risks, particularly if the poacher is looking to make not only a senior hire but also hire their team. Carried out in the wrong way it can result in court proceedings against not only the individual employee and/or their team but also against the poacher itself. Court proceedings can be very expensive to defend and time consuming. They are public and can quickly damage the poacher’s brand if it is found by the court to have acted in an underhand way.
Here are some top tips for poachers seeking to minimise the risks of claims:
1. Use a recruitment consultant
Consider engaging a recruitment consultant to assist with the recruitment, rather than trying to manage it directly. They will know the star performers at your competitors without you telling them. This approach is less likely to lead to a breach of duty by the senior hire as they attempt to extract their team, or to a leak of information.
2. Review employment contracts
Obtain copies of the team’s contracts of employment (but take care not to ask the senior target for any but his own, as that will place him potentially in breach of his obligations to his employer) and pay particular attention to express duties during employment and any post-termination restrictive covenants. Do remember, though, that post-termination restrictive covenants will not be enforceable if they are too wide and go further than necessary to protect the employer’s legitimate business interests.
Always take legal advice on the enforceability of any restrictive covenants. If they are enforceable then there are really only two options: 1) negotiate with the current employer; or 2) try to find some leverage that might enable the senior hire to argue that he has been constructively dismissed, when the covenants will cease to be enforceable.
3. Consider confidential information
Consider what types of confidential information the employees hold and whether they might be free to use some information after the termination of their current employment. Again, check the employees’ employment contracts to see if there are any post-termination restrictions on the use of confidential information – if there are not, the employees will only be prevented from using confidential information which amounts to trade secrets or such equivalent high-level information. Also, team members will be free to use information which has become part of their own skill and knowledge.
4. Damaging evidence
Avoid creating a damaging paper trail which could be disclosable in any subsequent court proceedings. Remember that, in addition to emails and hard copy documents, text messages, WhatsApp messages, Facebook messages, Instagram posts and other social media/instant message communications will almost certainly fall within the scope of court and tribunal disclosure rules.
5. Remind prospective employees of the need to comply with their legal obligations
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 with their legal obligations. If you do become aware of any breaches of duty by any team member, do not take advantage of them.
6. Consider implied duties owed by the employees to their current employer
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. Case law confirms that this 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.
7. Consider fiduciary duties
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.
8. Risk of court proceedings
If you find yourself threatened with court proceedings including perhaps injunctive relief, consider whether a compromise can be reached with the targeted employer to avoid the cost and risk of litigation and potential reputational damage and, on the target’s side, the additional risk that its covenants will be struck down by the court. It may be possible to satisfy the targeted employer by providing undertakings, for example, by agreeing for a specified period to place the moving team in areas of your business which do not compete directly or by agreeing that the individuals will not work for certain named clients.
Whilst the poaching of senior hires from competitors is something the fashion industry will always have to contend with, it is important that poachers are mindful of the legal issues and risks involved in order to avoid expensive court proceedings and potential reputational and brand damage.