08 Aug Battle Stations
It is common for businesses to try poaching an employee from a competitor in order to gain a competitive advantage or to otherwise improve their business. After all, a good way to get ahead in business is to better learn what your competitors are doing and adopt their successful strategies or methodologies for your own benefit if possible. However, care needs to be taken when taking this approach lest the business be exposed to a claim for unlawful interference with contractual relations.
Ten vs Seven
In the recent case of Network Ten Pty Ltd v Seven Network (Operations) Ltd  NSWSC 692, Network Ten Pty Ltd (Ten) thought it had successfully lured a veteran programming executive (the Executive) from Seven Network (Operations) Ltd (Seven) only for the Executive to have a change of heart and elect to remain with Seven on a new deal. This was notwithstanding that the Executive had signed a 2 year employment agreement with Ten, and that the Executive’s appointment with Ten had been announced publicly.
In response, Ten brought legal proceedings alleging that the Executive had breached his employment agreement with Ten and that Seven had unlawfully interfered with its contractual relations. Ten sought an injunction to effectively restrain the Executive from working for Seven for the length of his 2 year employment agreement with Ten.
The Court found that the Executive had not breached his employment agreement with Ten. Under the Executive’s agreement with Seven, the Executive was required to give 3 months’ notice to terminate his employment. The Executive had changed his mind during his notice period and before his employment with Ten had started. The Court found that the Executive could not breach an employment agreement which 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 the Executive had not breached his employment agreement with Ten, Seven did not act unlawfully. However, the Court noted that if there had been a breach of the agreement, it would have concluded that Seven intentionally and knowingly induced that breach.
What does this mean for HR professionals?
If your business believes it has successfully poached an employee from a competitor only for the employee to have a change of heart before making the change, it is likely to be difficult to stop the employee from remaining with the competitor. Accordingly, instead of trying to stop the employee from remaining with their original employer, the business may wish to consider seeking damages from the particular employee and/or the competitor for any loss suffered as a result of the employee’s change of heart. However, this option may not be attractive as the amount of damages which may be awarded may be limited depending on the circumstances.
Of course your business needs to be careful when trying to poach employees from competitors lest it 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 his/her 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/she is subject to an express post-employment restraint which prohibits the employee from joining competitors for a specified period.