Hiring A Poacher?

The possibility of acquiring an established team who will bring additional new work for a business is nothing new and is always tempting.  In difficult economic times such a prospect and gaining an advantage over competitors can be irresistible.  However, a recent high profile case involving brokers at Tullett Prebon Plc and BGC Brokers LP provides an interesting case study of what serious consequences can arise. 

The ex-COO of Tullett, Mr Verrier , took up the role of Executive Managing Director at BGC in January 2009.  He soon approached a number of senior employees at Tullett who then acted as recruiters of other dealers.  Consequently 13 employees signed employment contracts with BGC (3 later changed their minds).  The 10 new hires also received signing on bonuses and a full indemnity covering any liabilities that may arise from their departure from Tullett to BGC.

As the detailed evidence came out in the various High Court hearings it became quite clear that a central part of the plan was that the employees would leave their employment at Tullett before their fixed term contracts came to an end possibly on the basis of claiming constructive dismissal that Tullets had somehow ( yet to be established) fundamentally breached their contract. 

Legal action was brought by Tulletts claiming that BGC, Mr Verrier and others had conspired to damage Tullett’s business; induced breaches of contract by the employees and had misused confidential information in the course of this significant and very damaging poaching exercise.  The Court found in favour of Tullett and also enforced the action to place the employees on garden leave, in some cases for up to 12 months.  The Court also upheld an interim injunction prohibiting BGC from any recruitment, both lawful and unlawful, of any Tullett employees for 12 months. 

This case helps emphasise the possible consequences of actions relating to a team move when the victim employer is faced with very significant damage by such a deliberate assault on its business. 

1.             Gardening Leave

In relation to garden leave the Court upheld a six month non-compete restrictive covenant in addition to a further period of garden leave, but limited to a total of 12 months rather than the 18 months requested.   A relevant factor in the Court’s decision in finding the shorter term was that it was some 12 months since an initial injunction had been granted but it remained reasonable to provide Tullett with this overall level of protection. 

2.             Non-Solicitation

The employees’ contracts contained a clause requiring them to disclose to Tullett, their employer, any direct or indirect approach or solicitation by a competitor regardless of whether they chose to move.  Tullett argued that this was a legitimate clause to help it protect a legitimate business interest by being able to inject some stability to it’s workforce.  BGC argued this was an unreasonable restraint of trade.  The Court held that such a clause was enforceable as a genuine device for employers in certain circumstances. 

In addition the Court made it clear that when, as in this case, certain senior managers owed fiduciary obligations to always act in their employer’s best interest, such duties can extend to informing their employer about a proposed team move to a competitor.  From the employees’ perspective, to be actively involved in such a recruiting capacity carries significant risks and it was wise and probably essential to secure a full indemnity from the prospective employer to avoid the huge costs of significant and expensive litigation, including against them personally. 

3.             E-Communications

In this highly digital age there are many ways of communicating and storing information and equally to obtain evidence in support of allegations.  These can include emails, text messages and telephone records.  Consequently, when the Court was informed that rather than disclosing certain evidence as requested, Mr. Verrier had unfortunately lost no less than eight BlackBerries together with certain vital evidence for the case, the Court were very unimpressed and commented accordingly. 

4.             Recruitment

In relation to recruitment, having established a clear and deliberate plan to induce the employees to breach their contracts, the Court was quite prepared to impose an order preventing all recruitment (not just unlawful recruitment) by BGC from Tullett for a period of 12 months. 

This case highlights a number of interesting aspects including how in appropriate circumstances, the Courts are ready to order very significant injunctions in scope and length, when a company can show that a competitor is acting unfairly and unlawfully and in a manner designed to damage their business.

For further information, please contact:
Mark Dent, Partner and Head of Employment Law
Direct Line: 020 7299 9263
Email: mdent@pcblawyers.com