Financial planners are facing the increased likelihood of restraint of trade provisions being imposed against them as their employers look to protect their client lists and revenue streams.
That is the bottom line assessment of workplace lawyers, with PricewaterhouseCoopers partner Neil Napper describing the growth in restraint cases by employers against employees as a “manifestation of broader commercial competition between competitors in the marketplace”.
“There’s always the risk for employers in a tough market that if their advisers can be attracted elsewhere, they could lose their protection of confidential information and, therefore, goodwill.
“One way to get traction in such a market is to get good people from competing players and to try to use their skill, knowledge and expertise to build up the business.”
Middletons partner Damian Sloan said the firm is experiencing a “greater emphasis on post employment restraints” in the advice sector, and not just at the “enforcement point”.
“Many organisations are now wanting to revisit the terms in their existing contracts with employees to try to ensure the contract doesn’t fall over in court because it’s unenforceable on its face,” Sloan said.
“I think there’s going to be more restraint cases, and as employers get better at documenting these contracts, it should follow that there will be more successful restraint cases.”
Sloan believes the growth in cases will be driven by increased poaching of staff among competitors, notably in the advice sector, as it is the “best way to grow business in tough times”.
“It’s a case of we know Joe Bloggs up the road has a great client base and a really good revenue stream, so let’s try and buy him to help us get through our crisis.”
Harmers Workplace Lawyers managing partner Joydeep Hor said “pursuing restraint cases is almost a de facto way of conducting recruitment among companies in a tough market”.
“A growing number of firms are deciding to defend the investment they’ve made in their staff, including pursuing restraint cases, because they can’t really afford for these people to leave,” Hor said.
“They’ve invested time, money and effort in their staff, and given that they can’t afford to spend on head-hunters to get new people, they are increasingly willing to pursue restraint cases as a warning to other staff.”
