Published 8 November 2019, The Daily Tribune
Business competition is not limited to battles over customers. As workplaces evolve into versatile and mobile organizations, employers find themselves at war to recruit and most importantly, to retain the most talented, productive, and dynamic employees.
Employee poaching refers to a situation when a company hires an employee from a competing company. What are the legitimate ways to prevent or deter poaching?
The employer, in the exercise of its management prerogative, may insist on an agreement with the employee for certain prohibitions to take effect even after the termination of their employer-employee relationship. For instance, a restraint clause may be incorporated in an employment contract to prohibit a separated employee from poaching employees and clients of his previous company. In Daisy Tiu vs Platinum Plans Philippines Inc. (GR 163512, 28 February 2007), the Supreme Court laid down three parameters of a reasonable and enforceable restraint clause: its duration; the geographical area in which it applies; and the scope/activities of the former employee that it seeks to control.
Should the separated employee breach the restraint clause, the employer may file a civil action for breach of contract against him and recover damages. The employer may substantiate its claim by presenting the employment contracts and other necessary documents and affidavits of witnesses who have personal knowledge about the poaching attempts.
In addition, the employer may recover liquidated damages, which refer to the amount stipulated in the employment contract that the aggrieved party may recover as compensation upon breach of obligations. If the employment contract is silent on the amount of the liquidated damages, the Court continued in Tiu that the employer has to defend the reasonableness of the amount that it would like to recover, taking into account the nature of the position, the element of voluntariness when the contract was entered into and the extent of actual or potential damage the breach may cause.
In case the “poached” employees have a lock-in period with their previous employer, the competitor companies where the “poached” employees will transfer may also be held liable for tortious interference of contract. This action pertains to a situation where a third person induces a party to renege on or violate his undertaking under a contract. It bears emphasis though that the competitor is aware of the lock-in period at the time of the transfer, or was subsequently informed of the same yet refused to yield its employment relationship with the “poached” employees.
In So Ping Bun vs Court of Appeals (GR 120554, 21 September 1999), the Supreme Court laid down the requisites before a civil action for tortious interference of contract may prosper: the employee had a valid contractual relationship; new employer had knowledge of the contractual relationship; new employer intended to induce employee to breach contract; the contract was in fact breached; and the employer was damaged.
By way of precaution, an employer may want to consider sending a notice to the competitor companies that incidents of poaching have reached its attention and further attempts of poaching will be dealt with to the fullest extent of the law.
For comments and questions, please send an email to cabdo@divinalaw.com.
