Can Employers Agree Not to Hire Each Other’s Employees?

Under U.S antitrust laws, employers cannot legally agree not to hire each other’s employees. These types of agreements, often referred to as “no-poach agreements,” are considered anti-competitive and are generally illegal.

Why No-Poach Agreements Are Illegal

No-poach agreements are considered illegal under antitrust laws because these agreements restrict competition in the labor market, just as price-fixing or market allocation would restrict competition for goods and services. Specifically, these no poach agreements violate:

The Sherman Antitrust Act: No-poach agreements are often viewed as “horizontal” agreements between competitors, which fall under per se illegal behaviour under the Sherman Act. This means they are considered illegal regardless of the rationale or perceived benefits.
The Clayton Antitrust Act: In some cases, no-poach agreements can also violate the Clayton Act, which addresses anti-competitive practices that may harm competition or lead to monopolies.
State Laws: Most states have antitrust and anti-competition laws which prohibit no poach agreements on the same basis as federal law.

No-poach agreements deprive employees of opportunities to move between companies for better pay or working conditions. By preventing workers from freely moving to different employers, companies gain an unfair advantage in controlling wages and working conditions.

If you’re an employee and your job opportunities are limited due to your employer’s actions, whether through an explicit or implicit agreement, you’ve been negatively impacted by their behaviour. An experienced employment attorney can help you get the justice you deserve.

Types of No-Poach Agreements

There are typically two forms of illegal no-poach agreements:

Explicit Agreements: This is when companies directly agree with each other not to hire or solicit each other’s employees. These agreements are often made at the executive or management level, but they are illegal, even if they are informal or verbal.
Wage-Fixing: In some cases, companies may also agree to fix or limit the wages they pay employees, which is another type of illegal agreement under antitrust law.

Enforcement and Penalties

In recent years, the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) have been cracking down on no-poach agreements. Since 2016, the DOJ has treated naked no-poach agreements (agreements that are not related to legitimate business collaborations) as criminal violations, meaning companies and individuals involved could face severe penalties, including:

Fines: Companies can face large fines for entering into illegal agreements.
Civil lawsuits: Employees affected by these agreements may file civil lawsuits to recover lost wages or damages caused by the restraint of competition.
Criminal prosecution: Executives or managers involved in forming such agreements could face criminal charges.

In 2015, tech companies, including Google, Apple, Intel, and Adobe, settled a lawsuit for $415 million, following claims that their no-poach agreement had suppressed wages for thousands of employees.

Exceptions

There may be some limited exceptions where companies that are part of legitimate business relationships, such as joint ventures, may include non-solicitation clauses in their agreements. However, these agreements must be narrowly tailored to be considered legal and should not extend beyond the scope of the business relationship.

What Should Employees Do?

If you believe your current or potential employer is part of a no-poach agreement, you have options.

You can report your concerns to the FTC or the DOJ, which investigates these kinds of anti-competitive practices.

If you suspect that your employer is involved in an illegal no-poach agreement, consider speaking with an employment attorney who can advise you on your rights.

At Rowdy Meeks Legal Group LLC, we will use our knowledge gained from being inside of several Fortune 500 companies to give you an advantage in pursuing your pay claim. You benefit from our inside experience, and we will use this experience to aggressively fight for your claim. We are currently representing employees in a federal court case against some of the nation’s largest financial institutions for no poach violations.