Employee Piracy

In today’s global economy, human capital has become many companies’ most important asset. Using competitive salaries and benefits to attract and retain personnel is now on everyone’s radar screen, but it is not enough. Companies also need to be wary of industry rivals that may seek a competitive edge by soliciting or “pirating away” their key employees. Perhaps of even greater concern is that key employees may leave to join a rival or set out on their own, but not without first having taken their pick of a company’s most valued personnel.

Some companies seek to insulate themselves against such raiding practices by attempting to lock in employees under employment contracts replete with covenants not to compete. However, noncompetition covenants are often not enforceable for want of an employer’s protectable interest. In more extreme circumstances, the common law offers remedies to the raided employer. But an even more effective alternative, at least in an apparent majority of jurisdictions, may be for companies to bind their employees by what courts have described as “anti-pirating” or “nonrecruiting” clauses, which ban departing employees from soliciting their former co-workers to leave.