Burnetts Bitesize Bulletin

Businesses taking a hardboiled approach on employee competition

One of the hardest hit industries by the economic struggles of the past two years has been the hospitality sector. With the days of closures, table service and curfews slowly moving out of the norm, it looked like the worst was behind us. However a new problem has arisen, particularly among restaurants – poaching employees!

Poaching Practices

A recent Radio 5 Live programme highlighted this growing trend whereby competing business owners attempt to entice employees away from their current job and into a new role in the competing business. Competitor businesses do this by simply walking in, offering substantial pay rises to the best staff, and crippling the current employer who cannot afford to keep up. Poaching applies at all levels but is frequently seen with jobs with a specific skill set or client base (like a chef for example), where the new employer can benefit from the experience that the employee will bring.

These practices increase where there is a shortage of talent in the industry, and with staff shortages from COVID and Brexit, the hospitality sector is desperately in need of certain roles that are key to success. While students and graduates may be taken on as front of house or serving customers, head chefs and maître d’s cannot be trained overnight.

So if it is not against the law when your employees are stolen, what can you do?

Recipe for Success

There are a few ways for employers to restrict poaching practices.

A good starting point is the contract of employment. (Please note that employment contracts cannot be changed unilaterally, so if you have employees without clauses like this, please take legal advice).

Here are a few changes you can make from first engaging an employee to protect your business interests:

• 1 cup of Garden Leave Clauses

Where an employee decides to leave, the employer might want to stop the employee from immediately performing their regular duties during the notice period and require them to stay at home, to keep them away from a competitor for as long as possible. The aim of garden leave is to keep the employee out of the marketplace long enough for any information that they have to go out of date, or for the employee's successor to establish themselves, particularly with customers, so as to protect goodwill. This can only be achieved if there is an express garden leave clause in the employee's contract allowing their duties to be varied, or withdrawn altogether, during the notice period.

• 1 teaspoon of Confidentiality Provisions

There’s a reason why the Colonel’s mix of herbs and spices is still a mystery! Where your business deals with confidential information, trade secrets, or other such secret ingredients, it may be worth implementing confidentiality provisions into your contract of employment to prevent an employee from disclosing, or otherwise benefitting from utilising knowledge of trade secrets in a different role. Confidentiality clauses can be tailored to fit the circumstances.

• 1 handful of Restrictive Covenants

A well-drafted restrictive covenant can restrict a number of types of post-termination activities. In cases of dispute, the courts will look to balance the protection with an employer’s legitimate business interests with an employee’s reasonable desire to be competitive and pursue career interests. Due to this, restrictive covenants will likely only be relevant for more senior staff members but this depends on the nature of the business.

Common restrictive covenants include clauses that:

• restrict an employee from working for a competitor, usually limited to be within a given geographical area (non-compete)
• prevent an employee from taking existing or prospective customers’ business with them or dealing with them (non-solicitation and non-dealing)
• prevent an employee from bringing along former colleagues to join their new employer (non-poaching and often very difficult to enforce)

Sometimes, less is more. The courts do not like restraints of trade. Lengthy periods of restriction can lead to the courts finding that they are actually unenforceable!

Room for Dessert?

Unfortunately, it looks like it will be a while before working practices are able to fully recover from the pandemic.

In the meantime, employers should be looking at any way to sweeten the employment deal where staff retention is concerned. The risks of staff exiting should be identified. For existing staff, it remains important that employers are making time to check in about their needs to ensure they are able to build lasting and trusting relationships with all staff.

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