EMPLOYMENT 27
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Broking teams are notorious for breaching
their ongoing duties of employment during
notice periods, and their restrictive covenants
afterwards. However, current employers have
the right to review all e-mails and personal
calls; with modern data-mining techniques,
nothing is irretrievable from employee
computers, and it is amazing what can be
deduced from telephone records.
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Client retention
afterwards. However, current employers have limited liability partnerships. However, great
A key consideration is the strength of the
the right to review all e-mails and personal care must be taken to comply with the tax
team’s personal relationships with its clients.
calls; with modern data-mining techniques, regime introduced by the Finance Act 2003,
The current employer may be able to retain
nothing is irretrievable from employee and accommodating pension arrangements is
business on the strength of its size and
computers, and it is amazing what can be also becoming increasingly important.
reputation, but if there is a strong bond
deduced from telephone records.
between team and clients (and the client has
The hiring employer must also insist that all
confidence in the team’s new home), then it is
Firms hiring new teams contractual obligations are complied with
likely that the account will move.
While broking firms are generally always in order that its does not face a claim for
on the look out for good hires, some basic inducing a team member to breach their
In such a case, timing is paramount. The
homework beforehand can help ensure fewer previous contract of employment. If an
current employer needs to quickly examine
problems later on. It is important to consider indemnity is offered by the hiring employer
the team’s existing contracts, including their
personal motivations – why is this team against any such claims, its consequences,
notice periods, gardening leave provisions,
seeking to move? Is there something you limitations, any rights of reimbursement
and restrictions relating to confidentiality and
should know about what they will be leaving (should the employee ultimately not join), and
non-solicitation.
behind? the tax effects must be carefully considered.
Gardening leave – or not?
It is also worth testing how portable their Smoothing the path
Gardening leave and periods of restrictive
client base really is, and considering what Hiring employers are, of course, concerned to
covenants should be considered together,
assurances have been offered. It is crucial ensure a smooth transition of business, and to
and they can amount to as much as 12-15
to bear in mind that restrictive covenants obtain the most benefit from their new teams.
months. Therefore, employers must ask
may prevent enquiries, and also that any Broker of record letters are usually required,
themselves whether gardening leave will be a
evidence about previous brokerage and perhaps with the run-off of previous business
wasted cost – and whether an account can be
premium figures may be unavailable due to included in the terms.
properly serviced in the team’s absence.
confidentiality provisions.
Assurances are also needed that there are
For example, putting a team on immediate
Putting a deal together no current, or likely, regulatory or disciplinary
gardening leave if a complex major renewal
When a broker decides to proceed with procedures against the employees, or any
is less than six to eight weeks away may be
its new hires, it needs to ensure that their existing notified PI claims (and none likely
a high risk strategy since, however good the
remuneration packages are pitched correctly to arise). The potential impact on future PI
replacement team may be, the risks of a PI
– and that any restrictive covenants to their insurance costs may be small, but a team
claim and upsetting the client become very
former employer are not breached. member required to help with existing claims,
high.
possibly involving long-term litigation, would

Interestingly, salaries are often less of an be considerably less productive.
Keeping data secure
issue than being able to offer tax-efficient
Broking teams are notorious for breaching
incentives, such as ‘golden hellos and
their ongoing duties of employment during
handcuffs’, ‘flowering share’ arrangements,
notice periods, and their restrictive covenants
limpet company structures, and the use of
February 2010 Insurance Brokers’ Monthly
Employment 26-27.indd 2 1/2/10 13:52:18
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