According to Mindaugas Justinas Pupka, a lawyer at the law firm “CEE Attorneys,” the Competition Law classifies as unfair competition actions the offer to employees of a competing economic entity to terminate their employment contract or not perform all or part of their job duties if this is done to gain benefit for oneself or cause harm to a competitor. In practice, such actions are often referred to as employee poaching, as stated in the “CEE Attorneys” press release.
Read more The largest amateur tennis tournament in Lithuania took place in Palanga
The issue of employee poaching as unfair competition usually arises only when the former and new employer are existing or potential competitors.
“The mere change of workplace or hiring of an employee is not illegal – every employee has the right to freely choose their professional activity and workplace. However, when an employee is poached through unfair actions – this is considered unfair competition, which can cause negative consequences for the new employer.
When distinguishing between lawful employee movement and unfair employee poaching, the focus is not on the fact of the employee’s transfer itself, but on the methods the new employer used to hire them. If the new employer acted through usual labor market means, such employee transfer is generally considered lawful, but if the competitor actively and purposefully sought to take over the competitor’s employees to gain a competitive advantage, such actions may be regarded as unfair competition,” says M.J. Pupka.
When does employee recruitment become unfair employee poaching?
According to the expert, courts in such cases do not limit themselves to a single fact – they assess the entire set of circumstances. They evaluate who initiated the contact between the employee and the new employer, whether the employee immediately started working for the competitor, whether one employee or a larger group transferred, what positions they held, what information they had, and whether the new employer gained a competitive advantage as a result.
“Equally important are the circumstances of the employee’s decision to leave the workplace. If the employment contract is terminated for objective reasons, such as unsuitable working conditions, this may be one of the signs that the employee’s decision was not influenced by the competitor’s actions but by a natural desire to change jobs. On the other hand, if the competitor actively seeks specific employees and encourages them to terminate their employment with the current employer, such circumstances may be viewed as a targeted attempt to take over the competitor’s staff.
Simply put, hiring an employee is considered lawful when they freely choose a new job, and the employer seeks their competencies, not the competitor’s team, clients, or confidential information,” says the lawyer.
Where is the greatest risk: team takeover and trade secrets
Unfair competition, including employee poaching, can manifest in various forms. According to M.J. Pupka, it is worth highlighting a couple of more frequent and risky cases.
The first risky situation is when the aim is to take over not just one employee but an entire department, part of a team, or a group of specialists in a specific field. In such a case, the new market participant, benefiting from the competitor’s established groundwork, can quickly start operations, and the former employer loses not only employees but also part of the competitive advantage, including the team’s accumulated knowledge, operational principles, and client relationships.
The second risky situation is when an employee is hired not only for their competencies but also with the expectation of obtaining the former employer’s trade secrets, such as data about clients, suppliers, the former employer’s pricing, or other non-public information.
Read more Protests erupted in Ukraine over the dismissal of Defense Minister Mykhailo Fedorov
In practice, unfair competition manifested solely by employee poaching is quite rare. It usually occurs together with other possible violations – acquisition of trade secrets, poaching of clients or suppliers.
How to protect yourself from legal risks?
For the new employer, the risk often arises not from the hiring of the employee itself but when confidential information or trade secrets of the former employer – client data, supplier lists, technical information, or other non-public information providing a competitive advantage – enter the company with the employee and begin to be used. In such cases, the new employer may be obliged to compensate the competitor for the damage caused and/or cease the unfair competition actions.
“In practice, there are situations when the employee themselves tries to use the former employer’s trade secrets or other confidential information during their work for the new employer. Such an attempt alone does not imply the new employer’s liability if this information is not accepted or used by the new employer. In such cases, it is advisable for the employer to document in writing that such information will not be accepted, stored, or used, and the employee must cease any transmission of it,” says the expert.
Working with the same clients the employee worked with at the former employer is not prohibited per se if the employee does not use the former employer’s trade secrets and confidential information. However, to reduce legal risks for the new employer, it is advisable to agree in writing with the employee that such information will not be used.
How to protect yourself from your own employees being poached?
According to the lawyer, one of the preventive measures is a properly drafted non-compete agreement.
When such an agreement is concluded, the employee must be paid compensation of no less than 40% of their average salary, and the agreement must clearly define the prohibited activity, territory, and duration.
If the valid non-compete agreement is violated, the employee would have to cease the competing activity, return the received compensation, and compensate the employer for the damage caused.
Employee movement between companies is a natural part of a competitive labor market. Legal risk arises not from the employee transfer itself but when employee recruitment becomes a means to take over a competitor’s team, clients, or trade secrets. Therefore, each situation should be assessed individually, considering all its circumstances.
Read more Weather changes are coming, but it will remain warm
