Dos and Don’ts in Employment: No-Poach Agreements Under Scrutiny

In 2011, a class action lawsuit was filed against seven tech companies, including Apple, Google, and Intel, alleging that these companies had for years secretly agreed not to solicit or recruit the others’ technical, creative, R&D, and other salaried employees, leading to suppression of employee pay and mobility within the industry. This agreement, otherwise referred to as a “no-poach,” violated the federal and state antitrust laws, and resulted in settlements totaling $435 million and an agreement to stop the anticompetitive practices. Of course, the tech behemoths had not entered into to a single formal multi-party contract—instead, the agreement was solidified through emails and phone calls over many years, ranging from Steve Jobs’ threats to file patent infringement suits against smaller competitors to bilateral “no cold call” agreements between HR officers not to recruit competing company employees.

The class action exposed a common practice in many other industries and triggered additional enforcement actions by the Department of Justice (DOJ) and the Federal Trade Commission (FTC), the public enforcers of the United States’ antitrust laws. In 2016, DOJ and FTC jointly issued their Antitrust Guidance for Human Resource Professionals, stating that agreements among competing employers “to limit or fix the terms of employment for potential hires” may violate the antitrust laws, and placing HR professionals on the front lines of their companies’ hiring practices.

Since 2016, the DOJ or FTC have brought criminal indictments and civil lawsuits against employers and individual company officers and managers in the rail, aerospace, and health care industries. DOJ has also filed statements of interest in other private enforcement suits, including one alleging collusion between fast food franchisors and franchisees not to solicit or hire the employees of the other franchisee or franchisor, and one asserting that Duke University and University of North Carolina medical schools entered into “naked” agreements not to poach each other’s medical school faculty.

Employers of all sizes should assure that the restrictive covenant agreements they require employees to sign at any stage of the employment relationship—including non-competition, non-solicitation, non-disclosure, and severance agreements—conform to the Antitrust Guidance and that their conduct complies with both antitrust, labor, and other employment laws. Failure to do so could result in not just civil penalties or damages, but criminal indictment.

And if you are an employee, know that employers cannot agree between themselves to set pay levels, share wage information, or otherwise coordinate employee pay with the intent to lower worker pay. Workers whose pay and ability to move up the ladder or to similar or better positions within the same industry have the right to seek lost income and stop illegal noncompetitive agreements.

Employees or employers with questions or concerns about whether their agreements comply with the antitrust laws are encouraged to reach out to the author, Anne Regan, at 952-460-9285 or [email protected].