Case Spotlight: Poaching Employees

We often see scenarios where an ex-employee tries to persuade his former colleagues to resign and join them in a new company. Such conduct can be considered as “poaching”, or soliciting employees to leave their employer to join a competitor.

Can an employer sue their former employees for poaching? 

This issue was discussed in Pearson Malaysia v Wong Mei Mei & 2 Ors [2009] 1 LNS 1249. 

 

Brief Facts

  • Pearson Malaysia sued 3 former employees (“Ex-Employees”) for poaching.
  • Pearson Malaysia alleged that while they were still in employment at Pearson Malaysia, the Ex-Employees tried to get existing employees to leave and join them in a new company.
  • There was no anti-poaching clause in the Ex-Employees’ contracts of employment. It was argued that the Ex-Employees’ conduct was in breach of their duty as employees to act in good faith and fidelity. 

 

Court’s Findings

The Court dismissed Pearson Malaysia’s claim, holding there is no implied term or duty on the part of the Ex-Employees not to solicit employees to leave Pearson Malaysia and to work for a competitor.

As there was no Malaysian case law on solicitation of employees, the Court considered and adopted the Hong Kong case of Emperor Resorts International Ltd v. Wong Chi Hang & Anor. There, it was held that the duty of fidelity did not extend to non-poaching of employees. The reason behind this was that the law does not regard employees as “assets” of the employer.

Although there is an implied term that an employee will serve the employer with fidelity and good faith, decided cases in Malaysia on this issue related to trade secrets and business connections, and not poaching. 

Factually, the Court also held there was no evidence that the Ex-Employees had poached employees.  A mere act of asking a colleague to join another company per se cannot be said to be in breach of a duty of fidelity.

 

Key Takeaways

The decision in Pearson Malaysia only decided there is no “implied” duty of fidelity by an employee to not solicit the company’s employees, because there was no anti-poaching clause in the Ex-Employees’ contracts of employment. Therefore, the Court did not consider whether an anti-poaching clause would have been enforceable.

A contrasting decision was reached in Sundai Malaysia Sdn Bhd v Masato Saito & Ors [2013] 9 MLJ 729, where the High Court allowed a claim against ex-employees who encouraged others to resign.  There, the High Court referred to the UK case of UBS Wealth Management (UK) Ltd and another v Vestra Wealth LLP and others [2008] EWHC 1974 (QBD) which held that a plot to resign en masse and join a new start up competitor as a “knockout blow” to cripple the employer, is a breach of duty:

“I cannot accept that employees, in particular senior managers, can keep silent when they know of planned poaching raids upon the company’s existing staff or client base and when these are encouraged and facilitated from within the company itself… the more so when they are themselves party to these plots and plans. It seems to me that would be an obvious breach of duties of loyalty and fidelity …”

Pearson Malaysia was decided on its own facts, and should not be taken as precedent that an employer cannot sue an employee for poaching. Employers who wish to minimise the risk of poaching should include express non-poaching clauses in their employment contracts. If there is proof that an employee has attempted to destabilise the workforce by encouraging mass resignations, there is still room to sustain a claim for breach of contract and/or breach of the duty of fidelity.

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This article was written by Donovan Cheah (Partner) and Lim Zi-Han (Senior Associate). Donovan has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific for 2017-2022, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.

Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations.  Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation. Have a question? Please contact us.

 

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