The ongoing legal spat over Google's hiring of a Microsoft executive is a reminder that "poaching" of top employees is alive and well.

But it's risky business in an era of employment agreements with non-compete clauses and other restrictions, experts said.

Tim Farrelly, president of San Francisco-based recruiting firm Coit Staffing, said that compared with the late 1990s, the practice has decreased, with companies becoming more selective. "They're not just taking anybody anymore," he said. "You really have to come to the table with a solid skill-set."

The issue of recruiting employees from under a competitor's nose ââ,¬" and the legal ramifications of doing so ââ,¬" resurfaced last week with the tussle involving Microsoft, its former executive Kai-Fu Lee, and Google.

Google announced it had hired Lee to lead a new research and development centre in China and serve as president of its Chinese operations. The same day, Microsoft sued both Google and Lee, who was a vice-president at Microsoft and played a key role in its operations in China.

The suit, filed in a Washington state court, claims Lee is breaking a non-compete agreement in taking his new job, and it accuses Google of encouraging Lee to violate promises made to Microsoft.

"Lee entered into a valid and binding agreement with Microsoft in which he promised that he would not, for a period of one year following termination of his employment with Microsoft, compete with Microsoft in certain, defined ways," the suit states.

Google and Lee fought back last week. "This lawsuit is a charade," They said in court documents filed prior to a Wednesday hearing in Seattle. "Indeed, Microsoft executives admitted to Lee that their real intent is to scare other Microsoft employees into remaining at the company."

In another filing made before Wednesday's hearing, Lee claims that in a 15 July meeting, Microsoft chairman Bill Gates told him, "Kai-Fu, [chief executive] Steve [Ballmer] is definitely going to sue you and Google over this. He has been looking for something just like this, someone at a VP level to go to Google. We need to do this to stop Google."

Last Thursday, Google asked a California court to declare Microsoft's non-compete provision invalid.

Google appears to be taking advantage of a California rule that frowns on non-compete contract clauses, and a war over courtroom jurisdiction could loom. Google representatives did not return requests for comment.

Long, sordid history
This talent tiff among tech-world powerhouses has many precedents. This is not, for example, the first time Microsoft has turned to legal channels to pursue former employees it felt were unfairly competing.

Several years ago, the company sued when former executive Tod Nielsen and a number of ex-Microsoft employees went to work for Crossgain, a start-up focused on allowing business applications to run over the Web.

Crossgain eventually disassociated itself from a number of Microsoft workers that were still bound to non-compete agreements. Among the other ex-Microsoft employees who were forced to step down, at least temporarily, were Nielsen and Adam Bosworth, a founder of Crossgain who eventually joined Google.

And Microsoft has been on the other side of things. In 1997, Borland sued the software giant, claiming it had hired 34 Borland employees over three years in an attempt to put Borland out of business.

Earlier that year, database software company Informix tried to obtain a restraining order against Oracle after 11 of its software engineers left for Oracle. And also in the late 1990s, SAP cried foul that 27 of its key executives walked out for rival Siebel.

There are signs, including a revived start-up scene, that competition for employees in the tech world is heating up. But it's difficult to find hard numbers on the practice of actively tempting workers at rival companies.

If anything, the amount of talent snatching in the software field has declined from a decade ago, said Jack Cage, senior client partner at executive search firm Korn/Ferry International.

Cage, who specialises in the software and tech services arenas, said one factor is the consolidation of the software industry during the past 10 years or so from some 500 public companies to fewer than 100. He also said companies aren't as likely to raid one another when there are so many people looking for work ââ,¬" such as the thousands laid off after the Oracle-PeopleSoft merger.

Farrelly suggests the greatest amount of recruiting among tech rivals these days is in the field of network security, an area that's become hot, given the rise of phishing and other computer threats. "There's a lot of [employee] swapping going on in that industry," he said.

Farrelly says non-compete agreements lasting a year or more are commonplace for upper-level tech employees in sales, but that doesn't keep them from moving to a similar company.

"All my sales guys have non-compete clauses, and they all jump ship," Farrelly said. "[And] when they jump ship, nine times out of 10 they're going to competitors."

By contrast, Korn/Ferry's Cage thinks employees have gotten more careful about abiding by agreements at a time when executive shenanigans can quickly make headlines. "Everyone is just much more open because they realise eventually there's going to be a document trail or some disclosure," he said.

Check the fine print
Even so, employers would be wise to ask their potential hires about previous employment agreements, attorney Jonathan Segal suggested in an essay earlier this year.

"While employers probably have no affirmative duty to ask about restrictive agreements, they do have a duty to take corrective action if they learn that an employee is subject to a binding restrictive agreement," Segal wrote in the essay, published by the Society for Human Resource Management. "Employers that become aware of, but ignore, post-termination restrictions can be held liable."

Segal said employment contracts can include prohibitions against competing with the former employer for a specific period in a specific geographic area; soliciting business from the prior employer's customers or potential customers for a set period; and using or disclosing confidential information created or acquired in the course of employment.

There may be wiggle room in some of these agreements, Segal suggested. For example, the hiring employer may want to closely examine a clause barring the solicitation of customers: "Does the restriction cover only current customers or does it also apply to former and potential customers?" he wrote.

Post-employment contract restrictions are becoming more widespread at California technology companies, said Martin Foley, attorney with the firm Sonnenschein, Nath & Rosenthal. Given the importance of intellectual property to a company's success, businesses are now asking both executives and "worker bees on the line" to sign agreements aimed at safeguarding a company's secrets, Foley said.

But when it comes to non-compete clauses in particular, California tends to side with footloose employees. Except in narrow circumstances, the state's code renders such agreements meaningless.

Not only that, but state courts have at times struck down employment contracts signed outside the state, Foley said. "California has voided non-compete contracts from non-California employers when the employee works in California or lives here," he said.

Foley also said the state has ruled against a legal theory invoked in Microsoft's suit: that former employees will inevitably disclose a company's trade secrets when moving to a competitor.

The Lee case seems to present some tricky questions about jurisdiction. Though Google is based in Mountain View, California, Lee is supposed to lead the company's operations in China.

In their court filing last Thursday, Google and Lee said Lee resides in California.

Microsoft took issue with Google's filing. "Forced to confront its clear violation of Washington law, Google is attempting to manufacture California residency for Dr. Lee in a poorly disguised effort to persuade a California court to treat him as a California resident in order to evade Washington law and renege on the agreement Dr. Lee made to Microsoft," Microsoft said in a statement on Wednesday.

Foley expects some high-powered legal fireworks in the case. "There's going to be a hell of a battle," he said.