The poaching of workers as a breach of contract and unfair competition practice

Abstract

This paper analyzes the lawfulness of poaching employees, examining whether such conduct may constitute a contractual breach or an act of unfair competition. To this end, the central hypothesis adopted is that this practice is, in principle, lawful, unless it contravenes a previously agreed no-poach clause or constitutes an infringement sanctioned by Law No. 20.169. 

In contract law, the study examines the validity of so-called no-poach agreements in comparative law and in Chilean Law. It concludes that such clauses are admissible solely as ancillary restraints to a principal contract, provided they meet the standards of necessity, proportionality, and temporary limitation, noting that in some jurisdictions indemnification claims arising from their breach are rejected when the scope of the obligation lacks adequate limits or boundaries. 

Regarding unfair competition law, using German law as a comparative theoretical framework, the study establishes that the poaching of employees may be sanctioned when it pursues reprehensible purposes -such as deliberately weakening a competitior or misappropriating their trade secret- or when it is carried out through censurable means, such a deception, harassment, or the abuse of a pre-existing relationship of trust. Under Chilean law, the suppression of such conduct is channeled through the general unfair competition clause of Article 3 of Law No. 20.169.