Talent battle in India coming to U.S. court

Poaching's high stakes illustrated in court fight

Employee poaching happens everywhere, but in India it happens on a large scale. A lawsuit that a smaller rival recently filed against outsourcing services firm Cognizant Technology Solutions could shed light on the situation.

HOV Services, a business process outsourcing firm in Chennai that is also incorporated in Delaware, is alleging that Teaneck, N.J.-based Cognizant, is trying to "cripple HOV's business on a global scale and [trying] to destroy HOV's competitive advantage" by "luring away" HOV employees in India -- more than 50 over the last several years.

HOV accuses Cognizant, which employs more than 100,000 people and has a large workforce in India, of operating a "clandestine operation" and conducting "raids."

The lawsuit alleges that Cognizant obtained a list of 450 HOV employees that includes their salary, bonuses, their "production efficiencies" and customer project names. HOV's headcount in 2010 was about 9,000. The lawsuit was filed in late January in federal court in New Jersey.

Poaching is endemic in India because of the IT sector's fast growth. Many Indian companies include attrition figures in earnings releases to show labor pool stability to investors.

Infosys officials, for instance, spoke of "heavy poaching going on" to explain attrition rates in one quarter last year, according to a filing with the U.S. Securities and Exchange Commission.

But poaching is a continuing legal issue here as well. In the U.S., the Department of Justice pulled back the covers last year on antipoaching agreements between Apple and Google, Apple and Adobe, and other companies.

A settlement last fall prohibits poaching, which the government sees as anticompetitive.

Alan Marcuis, an attorney at Hunton & Williams LLP in Dallas, says that poaching, or raiding, isn't illegal. "I'm aware of no law in any jurisdiction in the United States that prohibits employee raiding or employee poaching," he said.

If a poaching incident triggered legal action, it would be due to other issues, such as the loss of intellectual property or disclosure of trade secrets -- some form of a contract breach involving a particular employee, Marcuis said.

A former employee could also be subject to a breach of fiduciary duty claim if he starts recruiting from his former employer, said Marcuis. For a former employer to file such a claim, it would have to demonstrate that its former employee "owed a legal duty to the former employer not to engage in behavior that undermines his obligations [to that employer]," he explained.

Employers also use noncompete agreements as a means of keeping employees from jumping ship to join rival companies.

The case against Cognizant revolves around potentially illegal steps Cognizant might have taken in its efforts to recruit HOV employees, not poaching alone. For example, if it turns out that Cognizant did, as the lawsuit claims, gain access to HOV employee information, it could be further found that steps it took to get that information violated the New Jersey Computer Related Offenses Act.

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