Have you ever had a “No-Poaching” agreement with a competitor? If your first impulse is to ask “Isn’t poaching something you do with eggs or salmon?” then chances are you’ve never used one. That’s a good thing. No-poaching agreements are bad for you. OK, you may say, but what are they? A No-Poaching Agreement is an agreement between competitors not to take each other’s employees. Wait. That’s bad? Yes, it is. It’s also illegal. They violate anti-trust laws, specifically the Clayton Powell and Sherman Antitrust Acts. (I previously wrote about that issue here, if you’d like to review.) The federal government in general and the FTC and DOJ in particular are cracking down on them. Employees are also fighting back. Again though, what’s so bad about them and why should they be illegal? Are there any recent examples? Would last week be recent enough?
Here’s what went down: Sarah Hunter is a former intelligence professional, who worked at the US government’s Joint Intelligence Operations Center Europe Analytic Center in Molesworth, England (JAC Molesworth). Ms. Hunter filed suit on behalf of herself and a class of JAC Molesworth employees against Booz Allen, CACI and Mission Essential, federal government aerospace and defense contractors that entered into a no-poaching agreement with each other. The case is Hunter v. Booz Allen Hamilton Holding Corp., et al ,No. 2:19-CV-411 (S.D. Ohio).
According to the complaint, the contractors had contracts with the government to provide an indefinite quantity of services during a fixed period of time, aka indefinite delivery/indefinite quantity (IDIQ). Prior to the No-Poaching Agreement, the contractors allegedly competed aggressively for employees with experience at JAC Molesworth . The complaint alleges that the No-Poaching Agreement has resulted in suppressed wages and benefits for experienced workers, and restricted employee mobility, now that there is no longer a bidding war for talent.
The No-Poaching agreement here appears to be a “naked” agreement. (No, I’m not referring to anything naughty, so let’s keep our minds out of the gutter, shall we?) A naked agreement is simply a promise that doesn’t offer anything in exchange, and so it would not be enforceable. In other words if you want a promise from someone to do or refrain from doing something you must provide him/her something in exchange. Otherwise the promise is not legally binding. In this context, a naked agreement is further defined as one ” separate from or not reasonably necessary to a larger collaboration between the employers.” The contractors do not seem to be involved in any further collaboration, so their No-Poaching agreement seems to be a naked agreement. Such agreements are per se illegal under antitrust laws — even if they do not actually cause harm to any of the employers or employees.
There may be another consideration that the case alludes to but doesn’t necessarily address: No-Poaching agreements may have the effect of further eroding employment-at-will. According to the employees, a supervisor told them not to attend another contractor’s job fair, because under the agreement the competitors could not talk to the employees. What’s more, the employees allege that because of the agreement they were essentially captive, because: a) to maintain their work visas, they needed jobs, and b) if they quit they would have to pay their relocation expenses. Employment-at-will, a cornerstone of employment law in the US, says that either the employer or the employee can end the employment relationship at any time for any lawful reason or no reason. These employees are alleging that effectively they could not do so. Just an added thought…
Let’s get to the takeaways:
- You may not enter into a naked no-poach, no-solicit or wage fixing agreement. They are absolutely 100% illegal. The Department of Justice has said loudly and clearly it will criminally prosecute anyone who does.
- If you and a competitor are working on a joint enterprise, then a no-solicit or no-poaching agreement may be legal. Unless you are working on a joint enterprise though (e.g. working together on a project) don’t share information about each other’s employees and don’t enter into no-poaching, or non-solicitation agreements.
- The DOJ and FTC issued a joint publication,
Antitrust Guidance for Human Resources Professionals. I realize it might not be your idea of fun reading, but if your company is one that competes frequently with others for the same talent, you might want to have a look.
That’s all I’ve got for now, so see you next week.
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