In March 2007, SSG - a competitor for ISS - had contacted the regional director of ISS with the purpose of hiring him. The regional director informed the management of ISS about the situation, but nevertheless he began to collaborate with SSG. The purpose of the collaboration was to provide information to SSG about a number of ISS’ key employees. In October/November the key employees resigned from ISS, giving various reasons, and were shortly after employed by SSG. All solicitation clauses of the key employees were waived in connection with their resignation.
As a result, ISS lost a number of custumers, as practically all the key employees were responsible for the daily customer contact in their various regions.
Marketing Practice and Duty of Loyalty
The Maritime and Commercial High Court found that SSG had violated good marketing practice grossly and repeatedly.
Furthermore, the court found that the regional director had breached his duty of loyalty as a salaried earner repeatedly and intentionally, as he had actively assisted SSG in recruiting the key employees of ISS.
Compensation
ISS calculated the total loss to DKK 74 million, which they wanted SSG and the director to compensate. However, the court found that the amount should be reduced significantly. The reasons were, among others, that it was difficult to calculate the loss accurately and that ISS themselves chose not to enforce the solicitation clauses in connection with the resignations. Therefore the court reduced the compensation to DKK 15 million.
The regional director did not become subject to any claim, as he had not received any financial benefits from his misconduct.
iuno's opinion
The judgment is a good example that it is not always possible to obtain full compensation for losses resulting from violations of the duty of loyalty and the Danish Marketing Practices Act. This is because the loss can be difficult to quantify and prove.
iuno therefore recommends that you prevent such situations. One of the reasons for the reduction was – as the court states – the solicitation clauses being waived at the time of the resignation. Therefore, it is worthwhile considering the reasons why such clauses were agreed in the first place. Also, in some situations it can be advantageous to ensure that customers have contact with more than one employee. In this way it is ensured that customers still have a well-known contact within the company in case of a resignation of an employee.
Furthermore, the case shows that as an employer, a company may be liable for its employees’ disloyal behaviour towards their previous employer. iuno recommends that companies recruiting employees from competing firms train their recruitment managers and develop guidelines and clauses that serve to protect against this risk.
[Judgment given by the Maritime and Commercial High Court on January 7th 2014 – Cases H-109-09 and F-4-10]