Fighting back against team moves

Posted on 3 June 2015

Fighting back against team moves

First-class managers are vital to a successful business. They help attract and retain key customers and clients, draw top talent to the firm, boost team morale, influence workplace culture and add to the bottom line. 

Yet a senior manager who is instrumental in building teams and driving profits can also present one of the biggest threats to a business if they decide to up sticks and join a competitor.  This happens in even the most successful and profitable organisations. There are very few 'lifers' these days: people who choose to devote their whole working life to one organisation. It is critical to prepare for the departure of a senior member of staff and the potentially devastating impact such a loss can have on the business, if the right contractual safeguards are not in place.

In effect, following their move to a new organisation, all of the positives that that individual brought to the business (i.e. their skill and expertise, the strength of their relationship with their team of employees, the ability to lead, incentivise and give a clear picture of career development and progression to more junior members of staff) can very quickly become a highly effective 'recruitment toolkit' for a competitor. The departing manager suddenly becomes the competitor's recruiting sergeant: all of the positive attributes that were valued by the team members instantly become a liability to your firm, and those values are exploited by the recruiting sergeant to tempt the remaining team into following suit and joining the competitor. The business which has already lost the senior managers is then faced with multiple resignations in quick succession, the overnight loss of client vacancies, candidate opportunities and market share.

Seeking redress can be challenging. It is typically very difficult to find the evidence necessary to establish conclusively that the senior manager has been responsible for encouraging his former colleagues and team members to cross the Rubicon. Almost always, you are presented with a coincidence of timing and a strong inferential case, but very little tangible evidence. In addition, although an employee cannot generally recruit others within a business whilst still employed by that business, there may not be sufficient safeguards within the employment contract to prevent the former employee from approaching ex-colleagues after they have left or to prevent a team from resigning of their own volition and joining a competitor en masse.

A recent case decided in the Court of Appeal casts an interesting light on a team move situation. Whilst the case emanates from the insurance broking industry, the outcome is relevant to the recruitment sector and most other industries where team moves present a serious and realistic threat.

The case was brought by insurance broker, Willis, against another broker, JLT Specialty, and David Gordon who was appointed as CEO of the Specie, Fine Art & Jewellery Division within JLT (case citation: (1) Willis Ltd (2) Willis Group Ltd v (1) Jardine Lloyd Thompson Group Plc (2) JLT Specialty Ltd (3) David Gordon (2015)).

Over a number of days, Willis lost half of its employees and nearly its entire senior management team in its fine art, jewellery and special risk division in London to a team move. Some 22 people resigned on 2 April and a further 9 people between 9 and 13 April. They were hired by JLT, a direct competitor of Willis.

Willis was left with 30 junior people in the division. JLT claimed that it had recruited all of the employees without inducing anyone to breach the duties they owed to Willis. Willis, suspecting wrongdoing, applied for an interim injunction to prevent JLT from poaching any more of its staff while it investigated further.

When the case first came before a judge, an 'anti-poach' injunction was refused. The Court's primary reasoning for this was that the damage to Willis had already been done – it had lost half of its staff and nearly all its senior management within the division already, including its global manager, and therefore the granting of an injunction would in effect be closing the stable door after the horse had bolted. 

However, the Court of Appeal disagreed and overturned the High Court's decision, finding that there was a real risk of the pattern of departures continuing and that it was business critical to Willis to retain the staff who remained. On balance, the Court of Appeal decided against JLT and granted an anti-poaching injunction in favour of Willis.

For recruitment companies, the lesson to be learned from the case is twofold:

  • First, it is worth remembering that, as in the case of Willis, once a team has moved, much of the damage is already done. It is therefore always better to head off potential team moves in advance if possible. Robust "anti-team move" provisions, of the sort not frequently found in a standard suite of restrictive covenants, should be added to employment contracts.

    Such provisions are also a dissuasive factor for employees contemplating group departures (and thereby lessening the potential damage to your business). In the event that a team move does occur,  they provide an enforceable response and potential recompense where there is evidence or suspicion of foul play surrounding the team exit.

  • Secondly, businesses that are victims of large-scale resignations may find some sympathy from the Courts who are prepared to grant injunctions to help stem the haemorrhaging of staff and mass departures to a competitor. This stabilises the business and provides respite while an investigation into the circumstances surrounding the mass raid is undertaken.

The key, as with any threat to the business of this nature, is to ensure that you take the necessary pre-emptive steps, and should the event occur, be ready to act quickly and decisively to nip the issue in the bud.

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