“Employee poaching” – how to combat the phenomenon of employee poaching?

The term “employee poaching” refers to the practice whereby employers recruit employees from competing companies. This phenomenon often aims not only to acquire valuable employees but is also directed against competing firms and leads to disruption of competitors’ operations in the market. By taking over experienced employees, the recruiting employer gains the opportunity to obtain important information about their competitor, its clients, and the know-how developed within the competing company. Given the increasing frequency of employee poaching, especially in advanced technology sectors, the question arises as to what measures an employer can take to minimise the risks of the negative consequences of so-called employee poaching.

It should be noted that one can combat the practice of employee poaching both against the entity recruiting the employees and by taking preventive actions to reduce the risk of employees moving to the competition. In the former case, the employer can rely on the provisions of the Act on Combating Unfair Competition, which enable them to demand that the other entrepreneur cease unfair practices and/or remove the effects of such actions. Regarding the relationship with employees, legal measures can be introduced that either make it more difficult for employees to decide to move to another entity or make the option of choosing another employer less attractive.

Employee poaching as an act of unfair competition

In cases where employees are poached by another company, the employer can invoke protection under the Act on Combating Unfair Competition (hereinafter: ACUC) against the “poaching” entity. It should be emphasised that, as a rule, merely offering better employment terms to our employees by another employer cannot be deemed unfair conduct. However, if the recruitment of employees is aimed at achieving specific benefits or harming another employer and is carried out in a manner contrary to good practice (e.g. applying pressure, persistent persuasion, providing false information, etc.), such conduct may be considered an act of unfair competition.

According to Article 12(1) of the ACUC, one of the acts of unfair competition is inciting a person employed by an entrepreneur under an employment relationship or other legal relationship (e.g. contract of mandate, contract for specific work) to fail to perform or improperly perform their work duties or other contractual obligations in order to gain benefits for oneself or third parties, or to harm the entrepreneur. This act of unfair competition also occurs when an employer incites an employee to terminate the agreement with their current employer.

As emphasised above, it is crucial that the incitement to terminate the agreement is undertaken with a specific purpose, i.e. to gain benefits for that entrepreneur or to harm them. A classic example is when a group of key employees receives repeated offers to join the competition accompanied by false information about the poor financial condition of their current employer or other disparaging remarks, where the competitor’s aim is not only to acquire valuable human resources but to weaken the competitor’s market position. Other situations may also occur, where each case should be assessed as to whether the conduct constitutes healthy competition or is intended to disrupt it. We may face a situation where another employer does not incite but recruits the majority of employees in order to weaken the company’s market position. Such conduct, aimed at impeding the company’s operations, constitutes an act of unfair competition (Article 3 ACUC). Whether such cases disturb fair competition depends on the effect of the employee takeover, the value of those human resources to the employer, including the ratio of employees taken to those retained.

How to fight against an employer “poaching” employees?

If the circumstances lead to the conclusion that the conduct constitutes an act of unfair competition, the employer may – under Article 18(1) ACUC – demand that the violating party:

• cease the unlawful actions,
• remove their effects, i.e. issue a statement of appropriate content and form and remedy the damage caused.

By issuing a statement, the unfair entrepreneur can correct false information spread about the competitor on the market. When seeking redress for damage, the employer must remember that the burden of proving the damage, the occurrence of the unlawful act, and the causal link between the act and the damage lies with them. The extent of damage may include losses incurred by the injured party (e.g. recruitment costs of new employees) as well as benefits lost (e.g. loss of potential contracts due to lack of qualified employees).
Protective measures against disloyal employees

Article 12 ACUC is certainly worth attention in fighting unfair entrepreneurs engaging in employee poaching. However, legal proceedings can be lengthy and may not bring the desired results. Therefore, it is sensible to take preventive measures with employees that ensure a higher degree of loyalty.

Such measures include in particular:

• entering into post-employment non-competition agreements,
• protecting the company’s confidential information, including signing confidentiality agreements (NDAs) with employees,
• concluding non-solicitation agreements preventing employees from recruiting company staff after leaving,
• signing training agreements.

Non-competition agreements

One effective means to discourage employees from working for an unfair employer engaging in employee poaching is to conclude post-employment non-competition agreements. Under such an agreement, the employee undertakes not to engage in competitive activity against the employer or accept employment with a competing company after the termination of employment.

When drafting a post-employment non-competition agreement, several key issues must be remembered. First, such an agreement must be in writing and only entered into with employees who had access to particularly important information. It is the employer who decides which information is crucial and which employees have access. Second, the non-compete clause must be precisely formulated so the former employee can determine the scope of their obligations. Third, the agreement must specify the duration of the non-compete obligation and the amount of compensation payable to the employee by the employer.

The agreement may include a contractual penalty for breach of the non-compete clause and the employer’s right to waive the agreement. If the right to waive is reserved after termination, the employee will not know whether the non-competition clause applies, thus complicating their decision to move to a competitor. To avoid financial consequences from a late waiver, it is best to stipulate a waiver period ending no later than a few days after employment termination.

Protection of employer’s secrets

Under Article 100 § 2(3) of the Labour Code, the employee is obliged during employment to keep confidential information whose disclosure may harm the employer. This obligation ceases after employment ends, allowing the employee to lawfully disclose important information to the new employer who poached them. To avoid this, the employer may classify key information as trade secrets, which in practice means the employee cannot disclose such information after employment ends.

“Trade secret” means technical, technological, organisational, or other business information that is not publicly known, has economic value, and the entrepreneur has taken necessary steps to keep confidential. The employer should identify which information has economic value and whose disclosure would cause measurable harm. Examples include information protected by copyright law, the production process of a particular device[5], business activity data, client and contractor lists, pricing structures, marketing, and sales strategies. Employee knowledge, skills, and experience are considered personal assets of the employee and may be used by them independently; thus, they are not protected as trade secrets under the law. After identifying confidential information, the employer must take steps to maintain confidentiality, e.g. individual passwords, restricted access to rooms and documents, and applying the “need to know” principle by sharing information only to the extent necessary for work duties. If an employee unlawfully discloses protected confidential information, they will be liable under Article 18 ACUC.

NDA (Non-Disclosure Agreement)

To protect against disclosure by disloyal employees, it is best to conclude NDAs specifying the scope of trade secrets and the duration of confidentiality after employment ends. The NDA may also provide for penalties for breach.

Training agreements

Losing highly skilled employees poached under employee poaching can be particularly damaging to an employer who invested in their professional development by covering education costs. In such cases, it is worth signing a training agreement requiring the employee to remain employed for a certain period after completing training. The employer then has the right to reclaim training costs if the employee leaves prematurely.

Non-solicitation agreements

Employers may also enter into non-solicitation agreements with employees to prevent them from encouraging other employees (or clients) to leave after their departure. Because such agreements limit competition in the labour market, justified reasons must exist, such as protecting trade secrets.

Criminal sanctions

If trade secrets are disclosed following employee poaching, the affected employer may file a criminal complaint. Both the employee who discloses and the employer or person acting on their behalf who unlawfully acquires and uses such information can be held criminally liable under Article 23(1) ACUC.

Summary

In summary, an employer’s mere suspicion of employee poaching is insufficient. Poaching occurs when additional circumstances exist, such as spreading false information, intercepting trade secrets, and seeking to weaken the competitor’s market position. An employer can fight such improper practices by invoking the Act on Combating Unfair Competition. However, they should also take a range of preventive measures to protect themselves from employee poaching, including ensuring confidentiality of trade secrets, signing non-competition, confidentiality, training, and non-solicitation agreements with employees.