There are few matters that are more likely to make your Managing
Partner wake up in a cold sweat than their key fee earners being
poached (or, to use the less emotive term, being "laterally
hired"). The loss of a vital partner to a competitor, with
their valuable client connections, would be bad, but when the
entire team jumps ship with that rainmaker, the impact for the
losing firm can be enormous.
Firstly, there's the obvious impact on the fee income. But
also the former firm must ensure that client relationships are
maintained and the ship is steadied. The firm will be particularly
keen to send a strong message, not only to warn the departing team
off breaching their obligations, but to send a message to the
remaining partners and fee earners so they don't follow
English law allows employers to restrain their departing
employees' abilities to earn a living, but only in a way which
goes no further than to protect the former employer's
legitimate commercial interests. It is an area ripe for litigation
and a rogue word in a contractual restriction is enough to make it
held to be an unenforceable restraint of trade by the court. And
who in the world is more likely to want to argue about the minutiae
of contract wording than two rival law firms?
At the heart of these disputes are the post-termination
restrictions that the departing team owe their former law firm. If
their employment contracts were not kept up to date, there is a
strong chance that the non-compete and non-soliciting restrictions
contained therein are now unenforceable.
In addition, if the partner was a "traditional"
partner in a "traditional" partnership (not an LLP), they
will have owed fiduciary duties to their former firm. These include
the duty not to let their own career interests conflict with the
firm's commercial interest – perhaps by encouraging their
team to leave.
Poaching firms will also be understandably concerned. Despite
the best will in the world from the partner they have just hired,
there will inevitably have been some breaches of their duties
evidenced by one or two emails or text messages. WhatsApp messages
are not immune either – and any evidence that the poached
partner tried to coax their team to join them will be potentially
discoverable and definitely disclosable. That team being distracted
by a High Court action from their former firm will be the last
thing the poaching firm wants.
As a result, a commercial discussion commonly follows the
threatening of or issuing of such a claim. Such agreements can
provide for settlement terms as imaginative as the parties want and
can include early release (where the poached team or partner are
released early from their garden leave periods, allowing their
former firm a period of calm to preserve relationships with
clients), run-off (where the old firm retains entitled to receive
the fees earned by the team before their move), split-off (where
the team's client list is hived up between the firms) and
profit-sharing, where the poaching firm agrees to split the profits
they make from the new partner or team for a fixed period of
A version of this article originally appeared in Solicitors
Journal on 5th October 2016.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Court of Appeal has held that where a contract of employment lacks a provision for when notice of termination takes effect, it is effective from when the employee personally takes delivery of the letter containing notice.
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