Farrer & Co’s Birtwistle: Incentivising staff to stay is best tool against mass poaching
Employment lawyer Anna Birtwistle has told The Insurer TV that brokers should do more to incentivise key staff to stay after predicting no major shift in the recent trend of mass poaching in the sector.
With a series of poaching cases between major brokers having resulted in settlements over the past 18 months, Birtwistle, a partner at Farrer & Co, said there was potential for others to look to recruit teams from rivals, particularly if they saw the size of the settlements paid out as a viable price for acquiring a team.
However, she conceded that those firms involved in recent high-profile settlements might have second thoughts about embarking on further raids in the near term after spending “months in litigation, paying over huge sums as well as, in one case, issuing a public apology”.
Birtwistle said firms needed to do more to incentivise their staff to stay put.
“Much of this comes down to what businesses can do to retain the loyalty of staff and prevent them from wanting to go and take their business elsewhere to a competitor,” she said.
She said creating a workplace where people wanted to remain was a key step, with the law only able to protect businesses to a certain extent.
"The reality with the law is you cannot have restraint of trade in this country and so, the law will only enforce what it deems reasonable and legitimate, in terms of the protection of a business,” she said.
Within the insurance sector there is significant use of non-compete clauses, typically with minimum lengths of six months rising to 12 months.
“Non-competes are attractive to businesses, because they're something of a blunt tool to prevent an employee from moving to a competitor for a period of time,” she said.
Plans to reduce the maximum length of non-compete clauses to three months in the UK were announced in May, but to date this has not been legislated. Birtwistle said this was looking increasingly unlikely to happen before a general election.
“Watch this space – it's not to say that I don't think that this will remain on the agenda, but certainly not in the near future,” she said.
Against this backdrop, Birtwistle believes the sector as a whole will see a shift towards longer notice periods, and far greater reliance on garden leave provisions to lock individuals out of the market for a period of time.
She also predicted a greater focus on other covenants that exist in contracts, particularly around non-solicitation and dealing with existing clients.
“Businesses will be looking at those covenants to ensure that they protect their businesses adequately and that they are properly drafted.
“In the event that you can't rely on a non-compete, you will see better policing of those covenants,” she said.