Defending a relocation application – what to consider?
The Court of Appeal’s decision in Tullett Prebon PLC v BGC Brokers LP is a useful reminder of the serious legal risks involved in team moves.
The poaching of star teams of employees from competitors has been common practice in the City of London for years. However, a series of cases have illustrated the risks that are involved: not only for the prospective employer planning to carry out a poaching raid on a competitor, but also for the relevant employees.
For example, in the 2008 case of UBS Wealth Management v Vestra Wealth and others UBS was successful in obtaining an interim ‘springboard’ injunction against Vestra and a group of senior employees who left UBS for Vestra. In order to prevent them from taking any further unfair advantage of likely unlawful conduct during the team move, the injunction prevented them from inducing or doing business with some of UBS’s clients, and poaching further UBS employees, pending the full trial of the case. The parties then reached a confidential settlement of the case before its return to court for a full determination and judgment.
The UBS case was interesting for various reasons, including the high number of employees involved: it concerned a team move in which a group of 52 employees simultaneously resigned from UBS to join Vestra, following the establishment of Vestra by a senior former employee of UBS. (That employee had originally joined UBS as part of the sale of his successful business for a considerable sum of money). At the time of the injunction hearing, 75 UBS employees had defected to Vestra. In granting the springboard injunction, the court’s view was that UBS had presented a ‘formidable case’ that there had been an unlawful plan to poach its staff and clients, which had been planned and executed by the defendant former senior employees.
In the Tullett Prebon and BGC case, Tullett Prebon was successful in the High Court in their claims against BGC and a large group of employees. Tullett claimed conspiracy, breach of contract and inducing breach of contract. Interim and final injunctions were obtained, enforcing garden leave and post-termination restrictions, and also prohibiting BGC’s recruitment of Tullett employees for a one year period. 13 Tullett employees, including four desk heads, had signed lucrative ‘forward’ contracts by which they promised to join BGC, and were granted significant financial incentives to join as soon as possible. Three were persuaded to change their minds, but the rest attempted to leave Tullett shortly afterwards, unsuccessfully alleging constructive dismissal in connection with the attempts Tullett made to dissuade them from resigning and joining BGC. It was alleged that in total BGC was planning to poach 90 Tullett brokers.
Whilst there were some minor positives for BGC, in essence the outcome in the High Court was a resounding success for Tullett, and that outcome has now been unanimously upheld by the Court of Appeal. The case is a useful reminder that team moves present serious legal risks in which sound legal advice at an early stage is essential for all concerned (including the employees, not only the two competitor companies). These cases all turn on their facts, as illustrated by an unsuccessful team moves case last year involving Lonmar Global Risks and Tyser & Co. However, that case went against the general recent trend in team move cases, in which defecting employees and poaching companies have not enjoyed great success in the litigation that tends to arise. In light of the onerous duties that typically apply to senior managers such as desk or team heads – including a duty to inform their employer of any attempt by a competitor to poach employees – team moves can be a risky business unless very carefully handled.
For more information, please contact Andreas White at email@example.com.
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