The Head of our Research and Development Team has resigned and taken up a position with a key competitor. We suspect he wants to take his entire team with him. If this happens, the potential ramifications for the company are massive–our Research and Development Team is privy to confidential information and has a close relationship with high value customers. What can we do to protect the company’s interests? How do I handle it?

* Catherine-Ellen writes:

The situation you describe is what is sometimes referred to as a “team move”. Team moves are where two or more employees who work in the same business decide to leave and either set up in competition on their own account, or join a competitor. The loss of a team will often have a detrimental impact on a business so much so that the financial costs of litigation may seem justified to an employer that wants to protect itself.

Faced with the suspicion that a team move is happening, the legal and practical steps you take will be very important in seeking to protect the company’s interests. You should consider the company’s options carefully- what action is in the company’s best interests and what can be realistically achieved now and in the future to protect the company? Such considerations are likely to impact the tactical steps taken by the company and the legal remedies sought, whether it be through litigation or commercial settlement.

1. Firstly, establish the former Team leader’s and current employees’ legal obligations towards the company. This will involve carrying out a review of the employment contracts and in particular an assessment of the enforceability of the confidentiality clauses; restrictive covenants and any garden leave provisions in place. You should also consider whether any of the employees owe a fiduciary duty towards the company. In the context of restrictive covenants, it is important to not make the assumption that just because one particular clause in an employment contract is likely to be enforceable against a particular employee, this does not mean that it is enforceable against another. Various factors impact the enforceability of restrictive covenants and a “one size fits all” approach is unlikely to lead to an accurate assessment of the validity of the clauses.

2. Carry out a thorough investigation and conduct forensic IT analysis on employees’ e-mails and telephone records. In an English case (Tullett Prebon PLC v BGC Brokers & Ors [2010] EWHC 484 (QB)), the evidence was based on a forensic analysis of blackberries and mobiles (despite Mr Verrier having “lost” blackberries “whenever he thought they might contain inconvenient matter”). It was clear from the telephone records that the poaching operation had been co-ordinated using calls and text messages. It is important to seek legal advice in advance of carrying out any investigation as it could impact the reliability of the evidence gathered. There are also data protection issues to be considered.

3. Consider suspending the employees’ pending completion of a disciplinary investigation. Have robust disciplinary procedures in place.

4. Consider restricting the employees’ access to highly confidential information/materials/buildings/areas.

5. Assess whether members of the Research and Development Team; the former Team leader, and the new employer have committed any unlawful acts which could provide the basis for a legal challenge.

6. Consider the remedies available to the company. For example, the company could apply for springboard injunction relief to prevent the former Team leader and the new employer from taking advantage of an unlawful springboard obtained as a result of past unlawful conduct. The company could also apply for orders for delivery up of documents/other material belonging to the company to prevent further misuse. Other types of remedies available include a cause of action for breach of contract against the employees and former Team leader; a cause of action in tort against the former Team leader and new employer for inducing breach of contract and conspiracy.

7. Consider reminding employees (in writing) and the former Team leader of their legal obligations towards the company.

8. Consider offering incentives to members of the Research and Development Team to stay. These employees may also have evidence of other employees’ breaches. Prior to offering any incentives, consider the potential IR issues that might arise as a result of changing the particular employees’ terms and conditions of employment.

9. Team moves often work best when resignations take place simultaneously. If this has not happened, use the time effectively to improve the company’s position. It is important to bear in mind, however, that the employees may have already made their decision. Similarly, an expression of loyalty from an employee should not deter you from putting structures in place to monitor the situation.

10. Consider sending letters before action to the former Team leader and the new employer. This can be a helpful deterrent. Bear in mind, however, that if you do not subsequently take action, the former Team leader and new employer may consider the correspondence to be empty threats and continue with any unlawful activities.

11. Consider the terms of any retention bonus to see whether there are any claw back provisions. If so, attempt to recover sums paid.

12. Consider if it is appropriate to negotiate a commercial settlement. For example, this may involve the former Team leader and any other departing employees offering undertakings to the company, or to the court, to desist from further unlawful activities.

Employees are often the most valuable asset of a business. When a team move takes place, however, it is also clear they can be the greatest source of risk for a business. Not only can a team move to a competitor potentially ruin an entire business, it can also lead to drawn out and costly litigation and reputational damage. A swift, yet considered, response will be important to protect the company’s interests.