º¬Ðß²ÝÉçÇø

Competition for talent is a crucial component of modern business rivalry, with firms increasingly engaging in efforts to poach employees from their competitors. These efforts include employees soliciting former colleagues to join their startups or current companies, and companies directly or indirectly recruiting their competitors¡¯ current employees.

Different countries have varying legal perspectives and approaches to these practices.

In this article, the authors provide a comparative analysis of legal regulations concerning talent poaching in China, Malaysia and Singapore, offering practical advice on how companies can reduce and manage the risks associated with these recruitment tactics.

Non-solicitation clauses

Employers often impose post-employment restrictive obligations on employees, including confidentiality, non-compete and non-solicitation clauses.

In China, labour laws do not explicitly address non-solicitation obligations. However, judicial practice generally upholds non-solicitation clauses agreed on between employers and employees as valid and legally binding.

Similarly, in Malaysia, post-employment obligations such as non-solicitation clauses, intellectual property, trade secrets and company property protection clauses are common in employment contracts, and remain effective and enforceable after the employment relationship ends.

Singapore¡¯s approach differs. All commercial restrictive clauses, including non-solicitation clauses, are initially invalid and unenforceable unless the former employer can prove that the inclusion of such restrictions in the employment contract is to protect legitimate interests and is reasonable for both parties and the public interest.

The former employer must also demonstrate that the restriction is reasonable and does not exceed the necessary scope to protect those legitimate interests. Courts typically consider factors such as the duration of the restriction, the seniority of the employee, and the employee¡¯s influence on the former employer¡¯s staff and clients.

Legal liability

When an individual solicits employees from their former employer, they breach any non-solicitation agreement in place. But although the former employer can initiate a lawsuit for this breach of contract, securing a victory is not straightforward.

In China, most of these lawsuits end unfavorably for the employer. This is primarily due to two challenges: (1) it is difficult to definitively prove that an employee left due to solicitation, as the line is often blurred; and (2) even if solicitation is confirmed, proving the actual damage it caused is equally challenging.

In Malaysia, former employers face similar hurdles in demonstrating both the occurrence of solicitation and its impact on the employee¡¯s decision to leave.

In Singapore, the validity of non-solicitation clauses themselves is highly uncertain, making it just as tough to prove a former employee¡¯s violation of such obligations.

New employer poaching

Non-solicitation clauses bind the employee and their former employer, not the new employer. However, the new employer¡¯s poaching actions may still fall under unfair competition and tort laws, leading to legal liability.

In China, if a former employer can prove that a competing new employer maliciously poached employees ¨C for example, by luring or even coercing them to resign, fundamentally breaching principles of good faith and recognised business ethics ¨C they may have grounds to file a civil lawsuit against the new employer for unfair competition, and seek compensation for their losses.

Theoretically, the former employer could also report the new employer to local market regulatory authorities to seek administrative penalties for their unfair competitive practices.

However, both pursuing civil litigation and filing administrative complaints present significant challenges and, given current judicial and administrative practices in China, achieving successful recourse remains quite difficult.

In Malaysia and Singapore, former employers can file tort claims against new employers for interfering with contractual relations by poaching their employees, alleging improper inducement to breach non-solicitation clauses.

They may also accuse the new employer of engaging in a tortious conspiracy or unlawful trade interference. If the new employer is found liable, courts may issue temporary or permanent injunctions to prevent further misconduct and require compensation for losses incurred.

Additionally, if the former employer can prove that the new employer used trade secrets or intellectual property obtained from poached employees, they can sue both the employees and the new employer for infringement in all three countries.

Practical advice

Companies should conduct background checks on potential hires to assess any pre-existing restrictive covenants with former employers, including non-solicitation obligations. This risk assessment is crucial for making informed hiring decisions.

It is also recommended that businesses require new hires to sign a written commitment, ensuring they will not breach any restrictive obligations to former employers and will not use or disclose any confidential business information during their tenure.

This measure aids companies in demonstrating unawareness of any misconduct by employees, eliminating any implications of inducement or conspiracy. Additionally, firms should bolster employee training to mitigate legal risks associated with unfair competition and torts related to employee poaching.

To prevent talent poaching by competitors, companies need to implement measures that are both effective and aligned with local legal practices. For instance, in China, where legal recourse such as breach of contract lawsuits, tort litigations and administrative complaints are challenging, entering into non-compete agreements to restrict employees from joining rivals is a straightforward and pragmatic defence strategy.

However, in Singapore and Malaysia, where the validity of non-compete clauses faces high thresholds and outright non-recognition respectively, businesses should explore alternative preventive and remedial strategies.

Tracy Liu is a partner and Larry Lian is a counsel at Jingtian & Gongcheng