A series of legal actions brought by the Department of Justice (DOJ) and private parties in recent years has disclosed another area of antitrust risk that company executives, business owners, and human resource managers need to beware of. Employers who agree expressly or implicitly with their competitors not to hire or recruit each other’s employees are subject to claims that they have violated the antitrust laws. So far, these claims have played out in several high-profile actions against Silicon Valley titans Adobe, Apple, Google, Intel, Intuit, and others. Developments in this area warrant close attention because, like these employers, some may assume that such agreements are proper; yet, the DOJ has challenged these agreements as being illegal "per se" – unlawful on their face.
Earlier this week, a putative class of software engineers that filed suit against these tech giants for anti-poaching and anti-recruiting agreements announced they had settled with three of the defendants, Intuit, Lucasfilm and Pixar, for $20 million. Plaintiffs alleged the companies adopted agreements to cap pay packages to prospective talent, to abstain from recruiting one another’s employees, and to provide notice when an offer was made to a competitor’s employee. As often happens, this private class action followed a 2010 lawsuit brought by the DOJ against these same high-tech competitors making similar claims. The DOJ asserted the agreements were "facially anti-competitive" because they were agreements among competitors to restrict pay and limit job opportunities. In that case, the parties ultimately agreed with the DOJ to suspend these practices.
In 2012, the DOJ filed a similar lawsuit against eBay, claiming that eBay and Intuit senior executives entered into a "handshake" deal not to solicit or hire the other’s employees. eBay has not settled at this point and is vigorously denying that the "agreements" are unlawful. It has filed a motion to dismiss the lawsuit, which was argued in April and remains pending a court ruling.
The Bottom Line
In spite of the DOJ’s "per se" illegal approach to these cases, no-hire and no-solicitation agreements may be justifiable under some limited circumstances. However, the fact that the DOJ has challenged these agreements as per se illegal substantially increases the risk profile and requires caution for companies considering them. Employers seeking to enter into such agreements with competitors are wise to contact antitrust counsel to carefully evaluate the potential risk.
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