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Beware Non-poaching Agreements

May 18, 2018

 

When you have employees that are instrumental and valuable to the success of your company, it only makes sense that you would want to protect your investment in them. You don’t want that employee to leave and take a job elsewhere, especially if that job is with a competitor, and even more so if you’ve invested a lot of time, money, and effort training them. Enter the non-poaching agreement. In this type of arrangement, companies agree they will not solicit the employees of the other company. In 2016 the Federal Trade Commission (FTC) took a closer look at non-poaching agreements and published “Antitrust Guidance for Human Resource Professionals” in order to inform them and others involved in the hiring process of violations of antitrust laws posed by non-poaching agreements. This document clearly states that “agreements among employers not to recruit certain employees or not to compete on terms of compensation are illegal”.

 

In January 2018, The Department of Justice (DOJ) reaffirmed their intentions to vigorously pursue companies who entered into non-poaching agreements and stated there would be several cases on the horizon. One of the first cases they released information about was The United States v. Knorr-BremseAG and Westinghouse Air Brakes Technologies. The civil complaint brought against these companies argued that employees were harmed by “deny[ing] … [them] access to better job opportunities, restrict[ing] their mobility, and depriv[ing] them of competitively significant information that they could have used to negotiate for better terms of employment.”

 

So how can you be sure you are not violating any antitrust laws? Here are some non-poaching agreement situations that you should avoid.

 

  • Be sure you do not speak to anyone at another company about limiting employee compensation, benefits, or other terms of employment. Agreeing to set or cap wages for particular positions so it is not financially attractive for an employee to change jobs is a violation.

  • Do not enter into any agreements where you refuse to solicit or hire other competing companies’ employees.

  • Do not share or receive confidential information regarding salaries, benefits, or other terms of employment unless there is a true business purpose such as a merger or acquisition. However, you cannot stop an employee from sharing or discussing their compensation. (Look for a future blog discussing this topic.)

  • Do not discuss any of the above topics with representatives of other companies, including at trade shows or social situations.

 

It is irrelevant whether or not the non-poaching agreement is written or verbal. An investigation can be started and civil and/or criminal charges brought against the individual, the company, or both. The emphasis is on protecting the worker as the practice of non-poaching agreements seem to keep wages low and limit workers’ opportunities for growth.

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