When faced with the threat of a large-scale team move, swift action by the employer can help mitigate any potential damage.

In UBS Wealth Management (UK) Limited & another v Vestra Wealth LLP & Others (2008) EWHC1974 (QB), the High Court granted a springboard injunction against Vestra following the poaching of large numbers of staff from UBS.

Where employees have used former employers' information or positions to their own advantage, and by doing so gained a head start or "springboard", the court may grant a special type of injunction to prevent them from taking unfair advantage of the springboard they have obtained.

The springboard injunction has traditionally been used in cases where an unfair advantage or head start was gained through misuse of confidential information (Balston Limited v Headline Filters (1987) FSR330), or where an unfair advantage was gained by inducing an employee director to breach his contractual and fiduciary duties (Midas IT Services Limited v Opus Portfolios Limited (unreported, 21 December 1999, CHD)). The UBS case clearly confirms the principle that springboard injunctions are not confined to cases of abuse of confidential information, but can be applied to any breaches of contract by the defecting employees.

The decision shows the courts' readiness to apply the brakes to the otherwise lawful activities of a defendant whose earlier wrongdoing has given them a competitive head start. It also serves as a good illustration of some of the legal pitfalls of organising a large scale team move. In this case, the evidence suggested that Vestra had obtained an unfair head start by inducing UBS staff to breach their employment contracts and so the Court prohibited (for the time being) Vestra from approaching or doing business with UBS' clients – something which it would otherwise have been free to do.

Facts

Briefly, the facts of this case were that UBS Wealth Management (UK) Limited ("UBS") operated a wealth management business and had employed Mr Scott (one of the defendants in the case) in a senior position following the acquisition of two stockbroking firms, one of which he had worked for previously. However, he resigned from his employment at UBS in May 2007 and, in exit negotiations, agreed that any restrictive covenants barring him from competing with UBS or soliciting its clients or staff would only bind him until 1 September 2007.

Mr Scott founded a new business, Vestra Wealth LLP ("Vestra"). He persuaded a large number of UBS staff to join him, culminating in a mass resignation of 52 UBS employees on 19 May 2008, followed by another 23 in the following weeks. UBS discovered transcripts of telephone calls made to and from UBS telephones (all of which are recorded by UBS as a matter of course) and, with this information, asked for a springboard injunction, pending trial, to restrain Vestra and the other defendants from taking unfair advantage of alleged breaches of contract by former UBS staff and conspiracy between those staff and Mr Scott.

The defendants argued that the mass resignation was due to the sole endeavour of Mr Scott who had been freed of his restricted covenants and was at liberty to compete with UBS and to solicit its staff and clients to join him after 1 September 2007. However, UBS argued that the defecting UBS staff, including certain senior managers, had acted collectively and in secret so as to persuade staff to leave and to co-ordinate the defections from within. UBS alleged that, in doing this, they had breached their employment contracts and also alleged that the defendants had induced breaches of contract by other employees and had participated in an unlawful conspiracy.

Decision

The High Court granted UBS' request for an injunction pending trial. Whether the injunction should continue after the trial would be a matter for the trial judge to determine. The Court concluded that the place for resolving factual disputes was at trial not at an interim hearing; however, it did recognise that it must give some consideration to the claimant's prospects of success and give initial conclusions as to relative strengths and weaknesses of the parties' arguments, without coming to any clear conclusions of fact. The Court therefore acknowledged that, once Mr Scott's restricted covenants had ended, he was free to solicit UBS' clients and staff himself. However, he was not free to assist and encourage the staff of UBS to "act collectively to sabotage UBS in breach of their own duties of loyalty and fidelity". The Court also suggested that "it was inherently unlikely" that a whole department would leave UBS en masse to join Vestra without extensive discussion between staff beforehand and therefore doubted the defendants' argument that Mr Scott had been the sole co-ordinator of the departures. The Court made clear that it had reached this conclusion due to examples of transcripts of telephone calls, that UBS had recorded as a matter of course, showing that Mr Scott had not acted alone in organising the defections.

Comment

This case shows the legal pitfalls of organising a large scale team move. Resignations will generally need to be orchestrated covertly and quickly and take place simultaneously. If the new employer, with the assistance of its headhunters, really does make all of the running, then no laws may have been breached. In practice, however, to arrange and organise a successful poaching of employees, particularly where large numbers are concerned, several employees will tend to act in concert, and in breach of their existing duties of fidelity, to persuade others to defect and to co-ordinate that defection from within. If this is not the case, the employer may have a chance to mitigate the damage by persuading staff to stay, recruiting replacements, or strengthening client relationships.

The difficulty for the employer on the other hand is in obtaining the evidence and, in this case, the fact that UBS recorded all of its telephone calls as a matter of course was undoubtedly the key evidence required for the springboard injunction.

The case has now settled on confidential terms, but it is likely that UBS' speedy action to secure injunctive relief aided it to secure a more favourable settlement than might otherwise have been the case

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