Pitfalls of headhunting a rival’s employee


There’s a need to tread carefully when trying to poach employees, as a recent court case involving Network Ten and Channel 7 illustrates.

It is common for businesses to try headhunting an employee from a competitor in order to gain a competitive advantage. However, care is needed so that the business isn’t exposed to a claim for unlawful interference with contractual relations. In the recent case of Network Ten Pty Ltd v Seven Network (Operations) Ltd [2014] NSWSC 692, Network Ten thought it had successfully lured veteran programming executive John Stephens from Channel 7. Stephens had signed a two-year employment agreement with Network Ten, and the appointment had been announced publicly.

But Stephens later had a change of heart and elected to remain with Channel 7 on a new deal. In response, Network Ten brought legal proceedings alleging that Stephens had breached his employment agreement with Network Ten and that Channel 7 had unlawfully interfered with its contractual relations. Network Ten sought an injunction to effectively restrain Stephens from working for Channel 7 for the length of his two-year employment agreement with Network Ten.

The court found that Stephens had not breached his employment agreement with Network Ten as, under his agreement with Channel 7, he was required to give three months’ notice. Stephens had changed his mind during this time and before his employment with Network Ten had officially started. Stephens could not breach an employment agreement that had not yet commenced.

The court also held that for the tort of interference with contractual relations to be established, there must be a breach of an agreement. Since Stephens had not breached his employment agreement with Network Ten, Channel 7 had not acted unlawfully. However, the court noted that, if there had been a breach, it would have concluded that Channel 7 had intentionally induced it.

What does the Channel 7 vs Network Ten law suit mean for HR professionals?

If your business believes it’s successfully poached an employee from a competitor, only for the employee to have a change of heart before the move, it’s difficult to stop the employee from remaining with the competitor.

Instead of trying to stop the employee from remaining with the original employer, the business may wish to consider seeking damages from the employee and/or the competitor for any loss suffered as a result of the employee’s change of heart. However, the amount of awarded damages may be limited, depending on the circumstances.

You need to be careful when trying to headhunt employees from competitors, otherwise your business could be exposed to a claim that it has committed unlawful interference with contractual relations.

If the business is aware that a prospective employee would be breaching the terms of their employment agreement with the competitor by joining it, the business could be found to have acted unlawfully. This may occur where the employee discloses during the recruitment process that he or she is subject to an express postemployment restraint that prohibits the employee from joining competitors for a specified period.

This article is an edited version. The full article was first published in the November 2014 issue of HRMonthly magazine as ‘Battle stations’, which is out from out from 28 October. AHRI members receive HRMonthly 11 times per year as part of their membership. Find out more about AHRI membership here.

 

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1 Comment On "Pitfalls of headhunting a rival’s employee"

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Trent Dunn
Excellent article indeed. This tort of interference with contractual relations possibly also applies in an interview process when the prospective employer requests the prospective employee to disclose their current remuneration package, hence breaching standard confidentiality clauses in the contract with the current employer, particularly if the prospective employee declines on this basis and the prospective employer continues to probe. I understand a question of this nature is somewhat prevalent however, in my almost 20 years of experience I have never asked this question as, in my view, it is essentially irrelevant, the focus should be on what range the business… Read more »
More on HRM

Pitfalls of headhunting a rival’s employee


There’s a need to tread carefully when trying to poach employees, as a recent court case involving Network Ten and Channel 7 illustrates.

It is common for businesses to try headhunting an employee from a competitor in order to gain a competitive advantage. However, care is needed so that the business isn’t exposed to a claim for unlawful interference with contractual relations. In the recent case of Network Ten Pty Ltd v Seven Network (Operations) Ltd [2014] NSWSC 692, Network Ten thought it had successfully lured veteran programming executive John Stephens from Channel 7. Stephens had signed a two-year employment agreement with Network Ten, and the appointment had been announced publicly.

But Stephens later had a change of heart and elected to remain with Channel 7 on a new deal. In response, Network Ten brought legal proceedings alleging that Stephens had breached his employment agreement with Network Ten and that Channel 7 had unlawfully interfered with its contractual relations. Network Ten sought an injunction to effectively restrain Stephens from working for Channel 7 for the length of his two-year employment agreement with Network Ten.

The court found that Stephens had not breached his employment agreement with Network Ten as, under his agreement with Channel 7, he was required to give three months’ notice. Stephens had changed his mind during this time and before his employment with Network Ten had officially started. Stephens could not breach an employment agreement that had not yet commenced.

The court also held that for the tort of interference with contractual relations to be established, there must be a breach of an agreement. Since Stephens had not breached his employment agreement with Network Ten, Channel 7 had not acted unlawfully. However, the court noted that, if there had been a breach, it would have concluded that Channel 7 had intentionally induced it.

What does the Channel 7 vs Network Ten law suit mean for HR professionals?

If your business believes it’s successfully poached an employee from a competitor, only for the employee to have a change of heart before the move, it’s difficult to stop the employee from remaining with the competitor.

Instead of trying to stop the employee from remaining with the original employer, the business may wish to consider seeking damages from the employee and/or the competitor for any loss suffered as a result of the employee’s change of heart. However, the amount of awarded damages may be limited, depending on the circumstances.

You need to be careful when trying to headhunt employees from competitors, otherwise your business could be exposed to a claim that it has committed unlawful interference with contractual relations.

If the business is aware that a prospective employee would be breaching the terms of their employment agreement with the competitor by joining it, the business could be found to have acted unlawfully. This may occur where the employee discloses during the recruitment process that he or she is subject to an express postemployment restraint that prohibits the employee from joining competitors for a specified period.

This article is an edited version. The full article was first published in the November 2014 issue of HRMonthly magazine as ‘Battle stations’, which is out from out from 28 October. AHRI members receive HRMonthly 11 times per year as part of their membership. Find out more about AHRI membership here.

 

Leave a reply

1 Comment On "Pitfalls of headhunting a rival’s employee"

avatar
  Subscribe to receive comments  
Notify me of
Trent Dunn
Excellent article indeed. This tort of interference with contractual relations possibly also applies in an interview process when the prospective employer requests the prospective employee to disclose their current remuneration package, hence breaching standard confidentiality clauses in the contract with the current employer, particularly if the prospective employee declines on this basis and the prospective employer continues to probe. I understand a question of this nature is somewhat prevalent however, in my almost 20 years of experience I have never asked this question as, in my view, it is essentially irrelevant, the focus should be on what range the business… Read more »
More on HRM