As finance director, it’s your worst nightmare!
As finance director, it's your worst nightmare! Your most talented creative director comes into your office with your sharpest account director. They ask if they "can have a word". You get that sinking feeling and you're right – only it's worse than you thought. They sheepishly, but happily, inform you that they have decided to join your biggest rival (with the remainder of your star team!), or that they are forming a breakaway agency. They promptly disappear to the wine bar to discuss how it went. Meanwhile you are reeling from the shock and doing mental gymnastics with your potential loss of revenue.
When staff are the life blood of your business you need to keep it healthy. There are two types of medicine: prevention and cure.
The key message here must be to have a proper contract of employment which deals with the following:
Have an express provision to prohibit the removal of confidential information after employment has ended.
Have the power to exclude senior employees from the office (often called "garden leave") so that you can take them out of the marketplace for a while if necessary. This right needs to be very clearly set out in the contract of employment – there is no implied right to garden leave employees. The advantage of operating a garden leave provision (rather than relying on post-termination restrictions) is that it gives the employer complete control over the employee's actions during the notice period. The disadvantage is that you still have to pay the employee.
Use carefully-crafted post-termination restrictions to prevent key clients and employees from following your defection.
If the employee is a director you need the power to remove him from the Board without automatically terminating his employment.
If you suspect the team is about to defect then you need to gather evidence. The two key points here are:
Don't delay; and
Don't breach the individual's contract of employment.
Immediately gather the employee's contract of employment to see what cards you have and then:
Consider isolating the team from other employees, clients and confidential information. Garden leave is commonly used here, but only if there is power under the contract of employment.
Retrieve confidential information.
Monitor emails. Do you have an email policy in place which will allow the employer to do this?
Monitor expense claims. That sudden increase in client lunches may reveal solicitation of clients at your expense!
Remind the employee (in writing) of termination covenants contained in their contracts and the fact that whilst he is your employee they have an obligation to act in the agency's best interests.
Consider notifying the new employer of the post-termination restrictions contained in their existing contracts of employment. This has a "double whammy" effect of ensuring that the new employer can't claim that it didn't know about the restrictions. It may also reduce the new employer's interest in the employees if it realises the employee can't bring that major client account with him for at least six months after starting work.
Consider poaching a team of your own (without inducing breach of contract)!