Talent Management Column

The Hypocrisy of Suing Workers Who Leave

Suing employees who leave an organization isn't going over very well with judges, writes Cappelli, especially when it turns out that the employer doing the suing is also poaching talent from their competitors.

Monday, July 16, 2012
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In the late 1990s, we started to hear companies say that one of their important goals was to get better at hiring good talent from the outside and also at retaining their best performers. Since then, it has become an even more important goal as a growing number of employers have focused their attention on outside hiring and fewer seem to be developing talent from within.

If you think about it, hiring from the outside almost always means hiring from some other employer. When you do that, it generates a retention problem for that other employer: One person's outside hire is another's retention story. Among a group of employers, it is not possible for everyone to get better at both outside hiring and retention. It is a zero-sum game. From the perspective of the economy, it isn't possible. What it really amounts to is saying that your organization can gain in that zero-sum game at the expense of other employers. We will win, and it will be at their expense. That's how competition works. 

There is a new wrinkle, though, and that has to do with retention efforts, typically at the executive level, where employers sue employees who leave. Part of the motivation for doing so is to stop those leavers from going to competitors, and frankly part of the reason is to send a message to those who might be thinking about leaving that the departure costs -- like those excess-baggage fees on airlines -- could be substantial. 

Most of these lawsuits take place at the executive level. They are often based on non-compete agreements with employees that restrict where they go if they leave. And, even in the absence of such agreements, employers may also sue employees who leave for potentially violating their trade secrets because they have access to important intellectual property that they take with them, especially if they go to competitors, as they usually do. 

Here's the catch: Daniel O'Meara, chair of the employment law group at Philadelphia-based Montgomery, McCracken, Walker & Rhoads, points out that suing employees who leave isn't going over very well with judges when it turns out that the employer who is suing is also poaching talent from their competitors. 

O'Meara reports half-a-dozen cases where judges have thrown out efforts by employers to stop employees from leaving for competitors. For example, an executive at the complainant employer testified in federal court that it was inevitable that his former employee would use valuable trade secrets at the new employer, thereby damaging the original employer. O'Meara cross-examined the executive about all the seasoned employees his company had hired directly from the competition. Did those hires inevitably reveal trade secrets from competitors? If so, then the employer would be liable for exactly the kind of legal action that they were trying to use against its former employee.

The executive conceded that it was not inevitable that an employee who leaves will reveal trade secrets from their former employer. "Frankly, the cross-examination was sort of fun," says O'Meara, and the injunction was denied.

It isn't that difficult to find out when employers are saying one thing about poaching talent and doing another. A little research on LinkedIn reveals who was hired from competitors.

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"The Internet and social media have made [it] easier and easier to gather information about inconsistent prior positions," he says.

O'Meara raises the interesting question as to whether it is even worth trying to hire talent from competitors -- or from their perspective, poach talent -- if you are then going to try to prevent your own talent from leaving for competitors. Judges apparently don't like hypocrisy, and claiming that it is damaging to business when your employees leave at the same time you are poaching talent from competitors certainly looks like hypocrisy. 

Maybe the best thing to do is take a more consistent position. If you want to fight the loss of executives, then maybe you need to back off on poaching talent from competitors and develop more talent yourself. If you want to grab talent on the outside, get used to losing it to competitors, as well, or at least give up on trying to fight those who leave. The earlier goal of trying to get better at outside hiring and at the same time get better and holding onto your own talent seems to have some limits. 

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His forthcoming book is Why Good People Can't Get Jobs: The Skills Gap and What Companies Can Do About It.




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