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Employee poaching bringing on headaches in oil and gas industry

December 30, 2013 - Ben Klein
Anya Litvak, Post-Gazette, Associated Press

Perhaps epidemic is too strong a word for what's happening in the region's oil and gas industry, but employee poaching has become rampant enough to warrant some preventive measures.

On one hand, it's flattering to know your company has produced something worthy of being stolen. And it could be good to have a friendly face on the client side for future contracts.

On the other hand, engineers and other midcareer professionals are hard to find and losing them can mean losing money for professional service firms, especially engineering companies working in the Marcellus Shale.

"They have a hard time keeping their talent," said Kevin Colosimo, managing partner at the Pittsburgh office of Burleson LLP. "They end up in the position of hiring people out of school, training them and then having them cherry-picked by their clients."

But changing the situation isn't always easy.

Take the experience of Green Tree-based Gateway Engineers, which has about a dozen master service agreements with Marcellus operators -- contracts required for service providers to work for particular drillers.

"For the most part, these [master service agreements] are void of any soliciting or any engagement [prohibitions]," said Ryan Hayes, Gateway's director of business development. "And when we go and try to ask for revisions, [the companies say], 'You guys want to play in the sandbox, this is what you've got to play with.' "

Where Gateway has had better luck with nonsolicitation clauses is in its strategic partnerships with other service providers, either engineering or construction companies that band together to go after certain projects.

Employee poaching by clients peaked around 2009 and 2010, Mr. Hayes said. Competitors hiring away workers is now the bigger menace. That's why when Gateway partners with its competitors, a nonsolicitation provision and penalty is a must.

"That's one of the first things on the table," he said.

Mr. Colosimo said anti-solicitation penalties are now common in contracts between operators and service firms.

If a new company comes to town and hires a contractor to fill some staffing gaps, the contract may stipulate a cooling-off period -- a stretch of time after the contract expires when the client agrees not to hire the contractor's employees. If the client wants to hire during that time, there could be a finder's fee penalty built into the agreement.

"I've seen it based upon a recoupment of costs, where the lending company has invested in the person through education," Mr. Colosimo said. "I've seen it based upon so much of the salary that they hire the guy at, which would put it in line with typical recruiting fee."

This dynamic isn't limited to the oil and gas industry. It's common in law and other professional service industries, Mr. Colosimo said.

Catalyst Connection, an Oakland-based nonprofit that helps manufacturers, has a clause in its contract with clients that obligates companies to pay a finder's fee for hiring away employees.

"It doesn't happen very often," said Catalyst's CEO, Petra Mitchell. "There's only been one situation, several years ago, where we felt that we had invested a significant amount of professional development in that employee," with part of the investment coming from taxpayer funds.

Ms. Mitchell said the organization tried to negotiate a payment with the poaching company. It didn't succeed and chose not to sue.

 
 

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