Insights

Guarding Your Talent: Effective Non-Poach Clauses in Client Agreements and Restraints of Trade

1 July 2024

In the competitive world of creative agencies, your team is your greatest asset. However, a growing trend threatens this valuable resource: clients increasingly poaching agency staff. The current economic climate driving cost savings has resulted in an increase in this activity, and we have assisted numerous creative agency clients navigate this tricky issue.

Understanding why this happens and how to protect your talent is crucial for maintaining your agency’s stability and success.

Why Clients Poach Agency Staff

Clients poach agency staff for several reasons:

1. Proven Expertise: Clients already see the quality and creativity of your team, making them attractive hires.
2. Cultural Fit: Your staff are already familiar with the client’s brand, values, and processes, reducing onboarding time.
3. Cost Savings: Hiring someone from an agency can be more cost-effective than undergoing a lengthy recruitment process.

Protecting Your Talent: Two Key Strategies

To prevent clients from poaching your staff, consider these two strategies:

1. Restraint of Trade Clauses in Employment Agreements
   • Preventative Measures: Drafting well-structured restraint of trade clauses can prohibit employees from joining clients for a specific period after leaving your agency.
   • Legal Enforcement: These clauses must be reasonable in scope and duration to be enforceable. A typical restraint period ranges from 3 to 12 months, depending on the nature of the work and the seniority of the employee.
2. Non-Poach Provisions in Client Service Agreements
   • Clear Prohibitions: Include explicit non-poach provisions in your client service agreements. These clauses should not only prevent clients from hiring your staff during the contract term but also extend for a period after the contract ends.
   • Impose Damages: To create a strong disincentive, stipulate significant financial penalties for breaches. We typically recommend damages amounting to 30% of the employee’s salary or contractor’s fee. This figure represents the recruitment costs, training expenses, and disruption caused by the loss of key staff.

When drafting restraints and non-poach clauses, clarity and specificity are paramount.

Benefits of Non-Poach Clauses

• Protection of Investment: These clauses protect the time and resources invested in your staff.
• Stability and Continuity: Maintaining a stable team ensures consistent quality of service for all clients.
• Financial Security: Financial penalties provide compensation for the disruption and costs associated with losing key employees.

By implementing these strategies, you can safeguard your agency against the disruptive practice of staff poaching. Well-drafted employment agreements and robust client service contracts will ensure that your talent remains where it belongs—driving the success of your agency.

Don’t leave your agency vulnerable— please let us know if you would like an obligation free quote to review your client services agreement and employment contracts.