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Talent battle in India coming to U.S. court

Patrick Thibodeau | March 25, 2011
Poaching's high stakes illustrated in court fight.

FRAMINGHAM, 25 MARCH 2011 - Employee poaching happens everywhere, but in India it happens on a large scale. A recently filed lawsuit by a smaller rival against outsourcing services firm Cognizant Technology Solutions may shed light on it.

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

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

It says it obtained a listing 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 thanks to the IT sector's fast growth. Many Indian firms 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 at 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 anti-poaching agreement between Apple and Google , Apple and Adobe and other firms.

A settlement last fall prohibits poaching, which the government sees as anti-competitive.

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 poaching triggers legal action it is the result other issues, such as the loss of intellectual property or disclosure of trade secret - some form of a contract breach with a respective employee, Marcuis said.

A former employee could also be subject to a breach of fiduciary duty claim if they start recruiting from their former employer, said Marcuis. Under such a claim, "the executive owed a legal duty to the former employer not to engage in behavior that undermines his obligations [to that employer]," he said.

Companies also use non-compete agreements as a means to keep employees from rivals.

The case against Cognizant is about the issues related to the raiding accusation, such as a violation of the New Jersey Computer Related Offenses Act, for allegedly gaining access to employee information.

A Cognizant spokeswoman said the lawsuit's claims "are without merit."

HOV this month said it is merging with another business process outsourcing firm, SourceCorp in Texas, and will have about 14,200 employees once it is completed.

In an effort to address the broader issue, the Indian IT industry group Nasscom issued an "ethical framework" for IT industry late last year that sets out guidelines for hiring, including requiring employees to get a "final clearance" from an employer before starting a new job.

It also wants to discourage referral payments to employees who are providing job prospect leads from their previous employer.

Manish Antani, vice chair of the Global Services Practice Group at the law firm Barnes & Thornburg, said the poaching issue is getting worse in India and the IT firms, via Nasscom, are just trying to get ahead of it.

But he questions how effective this effort will be. "It's not something that is becoming law," said Antani of Nasscom's best practices for hiring. "It's just self-policing and at the end of the day the market will rule."

Jordan Rayboy, who heads Rayboy Insider Search, a firm that recruits data storage industry talent, said that poaching is something a good recruiter is always trying to do.

"The person they truly want is almost always a top performer doing the job successfully for one of their competitors," Rayboy said.

Rayboy said if there is any trend that he has seen recently is more and more companies are giving bigger bounties in terms of employee referrals, in the range of $2,000 to $5,000, he said.

Jobs board Dice said this month said that more than half of hiring managers and recruiters it surveyed believe tech talent poaching will get more aggressive. Nearly 2,700 responded to the poaching survey.

The methods of recruiting are also changing with the tools. Joel Capperella is the vice president of marketing for national staffing firm Yoh Services, has been using social networking, connecting candidates to specific interest groups on venues such as Facebook and LinkedIn.

"Why not offer a $25 gift card for somebody (an` employee) who can get 10 'likes' on the company's Facebook page, for instance -- to build that community out," Capperella said. Creating such communities, building those connections, creates a talent pool, he said.


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