What is employee poaching (talent poaching)?

Internal vs. external employee poaching

External poaching seeks to recruit employees from competing businesses outside of the organization. External poaching carries several essential benefits, such as the following:

• Specialized skills. Talented people can be recruited to fill a need for specialized skills or knowledge that an organization's current team lacks. Such skills are often difficult to fill through traditional open hiring processes.
• New ideas. This sort of recruitment can bring people with the required expertise and similar approaches to the existing staff, accelerating employee productivity and stimulating fresh ideas.

However, external poaching can pose potential drawbacks to both organizations involved. The following are some of those:

• Legal issues. Employee poaching can present legal complications due to prevailing noncompete or confidentiality agreements between a potential hire and their current organization.
• Reputational damage. Poaching can damage the poaching company's reputation, damaging business and even interpersonal relationships between competitors.

In contrast, internal employee poaching refers to recruiting employees within the same organization. The idea is that the strongest candidate already works in the company and will be the easiest to bring on board. Acceptance of internal employee job poaching varies from organization to organization. Many consider internal employees part of their talent pipeline. Internal poaching can bring benefits, such as the following:

• Speedy onboarding. Internal hiring accelerates the onboarding process because the poached employee already works for the company and has been through the onboarding and training processes.
• Cost-effective. It can cost less to hire internally because job search expenses are less, and timeframes are shorter. In addition, the employee can get started faster and might even know their new team already.
• Morale and productivity effects. Internal moves can enhance morale and boost productivity if the move is framed as career advancement with more pay and opportunities.

But internal employee poaching can also have several drawbacks for hiring managers to consider:

• Damage the poached team's morale. Internal poaching can leave a team without an important contributor, which can adversely affect that team's productivity and morale. This can disrupt the work of the poached team, along with timelines and budgets for their projects.
• Internal conflicts. Internal poaching can cause conflicts between managers, as well as employees who might feel left behind or overlooked while a colleague is hired away.

Some employers require a poacher to follow a certain process or etiquette when hiring internally. For example, they might require the internal poacher to first discuss the idea with the employee's manager before approaching potential candidates or extending an offer to an internal employee.

Is employee poaching legal?

Employee poaching is legal. In 2015, the U.S. District Court in San Jose approved a $415 million settlement with Apple, Google, Intel, and Adobe to end an antipoaching case. According to court documents, a civil case alleged the four companies had agreed to abstain from actively soliciting each other's employees. The lawsuit alleged that this hurt employees' ability to negotiate pay increases or move to another employer.

In a subsequent memo, the U.S. Department of Justice clarified that job poaching was legal. The "Antitrust Guidance for HR Professionals" memo said, "It is unlawful for competitors to expressly or implicitly agree not to compete with one another, even if they are motivated by a desire to reduce costs. Therefore, HR professionals should take steps to ensure that interactions with other employers competing with them for employees do not result in an unlawful agreement not to compete on terms of employment."

Employee poaching isn't without risks and ramifications. It might sour relations with a competitor. Suppose the poacher intends to gain confidential information about a company or trade secrets, such as sales leads or product design details. In that case, it might be unethical and could result in litigation.

Employers also have to consider the terms of an employee's noncompete agreement. Even then, litigation can arise due to tortious interference, the intentional interference with a competitor's contract or business relationship with an employee, or unfair or deceptive practices to poach an employee.

Even though poaching is legal, organizations should be careful in their approach and ensure ethical behavior throughout the process.

What are nonsolicitation agreements?

Although poaching is legal in the strictest sense, several legal instruments limit its scope and impact. One legal instrument is the nonsolicitation, or nonsolicit, agreement. This contract between an employee and their hiring company prevents the employee from soliciting the company's employees, clients and customers. In effect, a nonsolicit agreement prevents the poached employee, and by extension, the poaching company, from also poaching additional company assets.

For example, suppose a highly successful salesperson works for Company A. Company B seeks to poach the salesperson with the expectation that they will bring over their clients and accounts to Company B. Company A prevents this if it has a nonsolicit agreement in place with the salesperson. This prohibits the salesperson from doing precisely what Company B would like them to do.

A nonsolicit agreement is typically implemented when the employee is first hired. It's in force from the date signed through a specified period -- often 3-5 years -- after employment ends. Other restrictions might apply, such as geographic location or distance.

In practice, any legal ramifications from violating the nonsolicit agreement would be between the poached employee and their original employer. However, the poaching company might face litigation for tortious interference if it tries to cause a breach of prevailing agreements.

Understanding noncompete agreements

Another legal instrument that can limit the effect of employee poaching is the noncompete agreement. These agreements stop employees from immediately working at a rival firm or starting a similar business.

Noncompete agreements are expanding as more organizations rely on employees with specialized knowledge of technology and practices. Such contracts seek to limit four main threats to an organization's business interests by preventing an employee from doing the following:

• Taking employment with a competitor.
• Starting a competing business.
• Developing a competing product or service.
• Poaching former colleagues.

In 2016 reports critical of noncompete agreements, President Barack Obama's administration said the evidence suggested that these agreements can keep workers from changing jobs and reduce their earning potential and bargaining power.

In 2023, the U.S. Federal Trade Commission (FTC) said approximately 30 million workers -- or nearly one-fifth of the workforce -- are covered by noncompete agreements. These agreements were once typically used with senior executives, but today even low-level employees are being asked to sign them. A noncompete agreement can be onerous and even apply to an employee laid off or fired without cause. In 2024, the FTC issued a ban noncompete agreements, which the courts have since blocked.

The enforceability of noncompete agreements varies by state. Some states -- notably California -- treat them as unenforceable. Broadly stated, an enforceable noncompete agreement must be reasonable in scope, duration and geography and protect reasonable business interests. Thus, a noncompete clause that permanently restricts an employee from working in the same or related field might be deemed unenforceable if litigation ever reached a courtroom.

Strategies to minimize poaching

Employees change jobs because they're offered a better deal -- it's just that simple. Employee poaching works because poachers offer employees one or more tangible reasons to leave. To paraphrase the old cliché, poachers make the grass look greener on the other side. Such incentives might include better pay, more flexible work options and opportunities for career advancement.

This sort of employee churn isn't helpful. When a company loses employees to a poacher, asking why and developing meaningful ways to staunch talent loss is important.

Consequently, addressing poaching requires self-evaluation about the company, its culture and how it treats its employees. Some efforts to mitigate poaching can include reassessment of the following areas:

• Compensation and benefits. Offer compensation and a suite of competitive and desirable benefits within the industry. Some extreme examples of substantial compensation and benefits are sometimes dubbed golden handcuffs, where pay and incentives are too attractive to leave.
• Career advancement. Study the career paths available to each employee role and consider whether employees have adequate opportunities to advance, either with traditional promotions or through other interesting opportunities, such as involvement in special projects like AI platform development. An involved and engaged employee is less likely to succumb to poaching.
• Corporate culture. Create a positive and rewarding work environment with meaningful recognition programs and work-life balance. A supportive corporate culture means happier employees who are less likely to be poached.
• Legal tools. Instruments such as noncompete and nonsolicit agreements can reinforce employee retention by binding the employee to protect the original company's trade secrets and intellectual property (IP). Although such legal tools are unpopular and sometimes difficult to enforce, using fair and reasonable parameters can add another layer of protection when an employee is poached.

Strategies to protect trade secrets

Companies are often differentiated and compete with one another based on the development of IP and trade secrets. Although these are related to unique creations, they differ in important ways:

• Intellectual property. IP covers an array of creations that include publicly disclosed and documented intellectual property, such as patents and trademarks, as well as internal knowledge that isn't publicly documented, such as trade secrets.
• Trade secrets. This is a specific form of IP related to confidential business information, such as formulas, processes, designs and customer lists, that's protected by keeping it secret.

Poaching is often a means a company uses to breach another company's IP. Rather than spending time and money to develop its own products, processes, or other knowledge, it's easier, faster, and cheaper to just "buy" a competitor's employee who already has that knowledge. The expectation and understanding are that the poached employee will bring that knowledge and share it with the new employer.

Since poaching is legal, a company has two options: outbid the poacher, offering a better deal for the employee to stay, or rely on legal protections to safeguard the organization's IP. The following are some of those legal protections:

• Noncompete agreements.
• Nonsolicit agreements.
• Nondisclosure agreements that keep confidential information secret.
• Confidentiality clauses in employment contracts or other engagement agreements, such as agreements used to hire third-party providers.

Written IP policies that outline trade secret protections for all employees typically cover every instrument. Departing employees usually have an exit interview where confidentiality commitments and obligations are reviewed.

There are many reasons employees succumb to poaching efforts. Know these signs of a toxic workplace to ensure a positive work environment.