Collusion on No-Poaching May Not Be OK

We often encourage companies to have employees sign non-compete and non-solicitation agreements to protect the employer from unfair competition by former employees. Executives at Google, Apple, Adobe, and Intel took this one step further, however, and proactively agreed amongst themselves not to poach employees from each other’s companies.  End result– salaries were purportedly artificially suppressed for employees at these companies.

A group of employees brought a class action lawsuit against the four companies, along with several others who settled the lawsuit earlier, alleging antitrust violations in In re High-Tech Employee Antitrust Litigation, 11-cv-2509-LHK (N.D. Cal.) According to reports, Google, Apple, Adobe and Intel settled the lawsuit last week by entering into a reported $324 million settlement.

So long as you use the correct it agreement it probably is ok to contractually obligate an employee not to compete with you.  But absent a protectable interest, competitors cannot agree to refrain from poaching and thereby artificially repress salaries.  What is a valid protectable interest in this context?  While nothing is certain, a court might permit a no-poaching agreement in the context of a joint venture.  In other words, you team up with a competitor on a specific project, you share employees on that project, and the two competitors agree not to poach the talent that they meet through the poject.

Instead of walking into trouble by asking your competitors to lay-off your talent, do things the right way and ask your lawyer to draft your restrictive covenants 🙂


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