It is every employer’s nightmare: a group of key employees leave to form a new competitor, gutting the employer’s ability to keep and serve its clients. That’s what happened last week, according to a complaint filed in New York state court by Aon Risk Services Northeast, Inc. Aon alleges that within hours after a group of key executives from its Construction Services Group resigned without notice, Alliant Insurance Services announced the formation of a “newly created” Construction Services Group headed by the same Aon executives. Within days, nearly 40 Aon employees had defected to join the new group.
What can you do to avoid such a loss? States that frown on non-competition agreements will often enforce agreements that prohibit departing employees from soliciting other employees to leave with them. Sometimes referred to as a “non-solicitation agreement,” these are more commonly known as “no-raid,” “non-raiding,” “anti-raiding,” or “antipiracy” agreements. Since such agreements do not prevent the departing employee from earning a living, courts are more likely to enforce them – so long as they do not restrict the employment opportunities of the company’s current employees. (In some states, “no-hire” provisions are regarded as unenforceable non-competition agreements against the employees that the promisor agrees not to hire.)
Unfortunately, having such agreements in place does not always stop a group defection. While you should have anti-raiding and non-competition agreements in place (as Aon did), you also need to keep your ear to the ground to learn if your employees are unhappy or concerned about their jobs, or if your competitors are nosing around. Pay attention to the leadership of key groups, and make sure ambitious employees have room to grow so that they do not need to look elsewhere to do so. Also consider ways to make sure that your rank-and-file employees owe their allegiance to the company rather than their manager, so that when the manager leaves, the employees are more inclined to stay and take the manager’s place than to follow him or her to a new employer. In the meantime, keep your agreements up to date and enforceable so that you have options for redress if the worst does happen.