We’ve seen federal and state government limitations on non-compete agreements across the country. The goal has been to make them rarer so that they’re used only in cases where a former employee could harm a business by taking their experience, skills and knowledge (much of which may be intellectual property) to a competitor.
“No-poaching” agreements have some of the same goals, but they often don’t directly involve employees. Employees may not even know about them. They’re agreements between or among competing companies not to “poach” the others’ employees either while they’re still employed or for a designated period after they’ve left.
They can be a violation of the law
The U.S. Department of Justice (DOJ) has determined that these agreements violate federal antitrust laws. The DOJ has stated, “It does not matter whether the agreement is informal or formal, written or unwritten, spoken or unspoken.”
The head of the business doesn’t have to be the one entering into these agreements for the company to be liable. Human resources professionals may be the ones actually involved in the agreements. The DOJ states, “An individual likely is breaking the antitrust laws if he or she…agrees with individual(s) at another company to refuse to solicit or hire that other company’s employees (so-called “no poaching” agreements).”
This doesn’t mean that every no-poaching agreement is a violation of antitrust laws. Federal courts have dismissed cases where they found that the no-poach agreements didn’t violate antitrust laws.
It’s crucial for companies to be very cautious about entering into agreements with other employers that can restrict employees’ job opportunities or compensation. The latter are known as “wage-fixing” agreements.
It’s not enough for a few people at the top of a company to understand the potential consequences of these agreements. Human resources personnel, for example, should understand what is and isn’t permitted. If there’s ever any question – and certainly before you sign on to such an agreement – you should seek legal guidance.