Team Moves – Are They So Wrong?

Team moves have always been a tricky area for employers. While it makes good commercial sense to recruit an existing team with a proven collective track record from a competitor, it invariably invites a strong reaction from the competitor in the form of legal claims for damages and injunctions to prevent the hiring of the team.

This issue was considered in a recent Singapore High Court decision involving Jardine Lloyd Thompson and Howden Insurance Brokers1.

The facts

After 17 employees resigned in April and May 2015, JLT brought claims against four of these employees, the new employer (Howden) and the recruitment agency which allegedly helped Howden to recruit JLT's employees.

JLT alleged that the mass defections were the result of a coordinated conspiracy by all six defendants to injure JLT. As the employees had no express restrictive covenants in their employment contracts, JLT's claims against them were for breach of their contractual and fiduciary duties by encouraging staff to leave and join competitors and by misusing confidential information such as the internal arrangements of their business and clients, which enabled them and Howden to gain an unfair competitive advantage over JLT.

On the back of these claims, JLT applied for four injunctions until the trial, including:

To prevent the employees from joining Howden for any business relating to insurance broking To prevent Howden from employing the employees JLT sought these injunctions to prevent their former employees from taking unfair advantage of the headstart which they would have (these are called "springboard" injunctions) from the misuse of confidential information, in competition with JLT.

These injunctions are intended to restore a level playing field between the parties, and are useful where there is a mass defection of staff to a competitor which can result in the misuse of confidential information.

The decision

In refusing to grant the injunctions, the Judge reasoned that recruiting employees does not in itself automatically create a competitive advantage. In fact, the law looks favourably on the efforts of employees to advance themselves, provided they do not steal or use the secrets of their former employers.

The Judge observed that some detriment and disadvantage is bound to happen when a large group of high-level employees leaves but that is a part of commercial reality. The ex-employer will have to recruit new staff and rebuild its business – in fact, they often...