How to Deal with Employee Poaching: Is It Even Illegal?

Competitive pay is one of the top motivators for employees. In fact, U.S. workers are most driven by a higher salary, followed by better benefits and remote work options.

Some of these workers are top talent, and organizations are eager to bring them into their workforce, even if it means targeting employees from other companies. But is it even illegal?

This guide explains what employee poaching is, how to deal with it, and the potential impact on your organization when it becomes a widespread issue. We'll also provide a possible solution to prevent employee poaching.

What is employee poaching?

Employee poaching refers to a practice where a company hires employees directly from direct competitors, even if those employees are already employed.

For example, a tech company approaches a software engineer currently working at a rival firm and offers a higher salary to lure them away, often to strengthen its own competing business. In short, it means taking talent from another business.

Experts describe poaching Experts describe poaching, also called job poaching, talent poaching, or lateral hiring, as a "very common practice" and see it to increase competition and attract experienced talent. While this strategy can improve organizational strength, it also poses a risk when key employees are targeted by competing firms.

Poaching may boost your organization's competitiveness, but it can hurt you if your best employees are targeted. Avoid this by improving your pay structure with Salary.com’s Compensation Software. It helps you price jobs accurately and protect your workforce.

Is poaching employees illegal?

No, poaching employees isn’t illegal under U.S. labor laws, as it is considered a voluntary employment decision. Experts say it is perfectly illegal and ethical for the hiring company, and any issues typically lie between the employee and their current employer.

While some employers blame hiring companies for poaching, it's believed that the real issue often comes from poor relationships with their employees.

Poaching is only illegal when it involves theft or deception, such as stealing intellectual property or confidential information, violating employment contracts or other contractual obligations with a former employer, or misusing trade secrets by hiring multiple employees from a single company to intentionally harm that competitor.

A clear example is the case of Arthur J. Gallagher & Co. v. Alliant Insurance Services, Inc., where the court found that Alliant engaged in employee raiding by improperly hiring multiple Gallagher employees.

It also noted concerns over disrupted client relationships as a result of the hiring. Legal counsel for Gallagher successfully argued the case, resulting in Alliant being ordered to pay $325,000 in damages.

Moreover, some organizations enter non-compete agreements and non-poaching agreements with a competing company to protect their workforce by preventing the hiring of each other’s employees. However, in 2016, the federal government ruled that these no poaching agreements and non compete clause agreements were generally illegal under antitrust laws.

States like California, Illinois, and Maryland are investigating similar agreements, especially in the fast-food industry, and companies that break the law face serious consequences.

It’s possible to avoid being a victim of employee poaching by focusing on keeping skilled employees. A strong compensation plan helps retain key talent, and Compensation Software’s updated market pay data can help ensure competitive offers.

The difference between recruiting and poaching

The difference between recruiting and poaching is that recruiting means openly attracting and hiring people for job openings, while poaching means directly targeting someone already working for a competitor and trying to get them to switch companies.

To give a full understanding, posting a job ad and interviewing several candidates is part of the recruitment process; reaching out privately to a high-performing employee at a rival company and offering a higher salary to get them to switch jobs is poaching.

Organizations can attract talent the right way with Compensation Software. This innovative tool helps create clear salary structures and competitive, market-aligned offers that support fair hiring and long-term employee retention.

Why does employee poaching happen in an organization?

Before learning how to deal with employee poaching, organizations need to understand why it happens. Here are some common reasons:

1. Competitors offer higher pay or better benefits

   As mentioned earlier, workers are motivated by competitive pay and benefits. If an organization does not offer competitive compensation packages, it risks losing employees as they may seek employment with companies that provide better opportunities.

2. Limited opportunities for advancement

   In 2021, a survey found that 63% of American workers quit their jobs due to a lack of career advancement opportunities. Organizations without clear professional development paths may see higher turnover and be more vulnerable to employee poaching.

3. Lack of retention strategies

   Companies that do not invest in retention strategies, such as employee engagement, regular feedback, or work-life balance, risk lower employee satisfaction and become more vulnerable to a poaching company looking to acquire their talent.

   Without these, many employees may feel undervalued and look for opportunities with organizations that care more about their well-being and growth.

4. Top performers targeted by competitors

   High-performing employees are often targeted by competitors seeking a competitive advantage. These individuals may be headhunted for their proven skills, experience, or ability to make an immediate impact.

   Without the proper compensation strategy, your organization could lose a key player. Avoid this by using solutions like Compensation Software to balance pay equity, identify issues quickly, and attract potential employees.

How to deal with employee poaching: strategies to consider

So, how to deal with employee poaching in your organization? Companies can follow these key steps to protect their talent and strengthen retention efforts.

1. Step 1: Review and improve your pay and benefits

   Offering competitive pay helps retain top talent. When employees feel underpaid or undervalued, they are more likely to leave for other jobs. Use compensation data and insights to regularly compare your total rewards salary, bonuses, benefits like health insurance, and perks—with market rates to stay competitive.

2. Step 2: Listen to employee feedback and respond to concerns

   Open communication helps spot issues early. When employees feel heard and supported, they’re less likely to accept outside offers. Use surveys, one-on-one meetings, or suggestion channels to gather feedback and take action on key concerns.

3. Step 3: Create clear career paths for your team

   A lack of growth opportunities, especially career development, often causes employees to leave. When employees see a future within your company, they are more motivated to stay. Offer promotions, upskilling, mentoring, or lateral moves to keep them engaged.

4. Step 4: Build a more supportive and inclusive company culture

   Aside from competitive pay, people stay for the environment. Build a culture where employees feel respected, connected, and included. Recognize achievements, support work-life balance, and ensure everyone feels they belong.

5. Step 5: Conduct exit interviews to learn and reduce turnover

   When employees leave, take time to understand why. Exit interviews can reveal issues like low morale, poor management, or better offers. Use this feedback to adjust your retention strategy and help prevent employees from leaving in the future.

Now that you know how to handle employee poaching and retain talent, you can build a more stable, engaged workforce. If you're still struggling, consider revisiting your compensation strategy. Salary.com's Compensation Software can help with salary structures and provide insights to stay competitive in the job market.