No-poach agreements contain clauses which prohibit the solicitation of employees. The party bound by such an agreement agrees not to compete with the employer for its employees and agrees not to solicit an existing employee to leave. These are common in the franchise industry, and currently under attack as being anti-competitive. Some of these agreements are enforceable, but are now under scrutiny by competitors, workers, Attorneys’ General of many states and the Department of Justice (DOJ). This article provides practical suggestions and best practices after providing a history of enforcement of such clauses.

Are No-Poach Agreements Antitrust Violations?

No-poach agreements between companies are anticompetitive and are violative of the antitrust law. In October 2016, the Obama-era DOJ and the Federal Trade Commission (FTC) issued a new HR Antitrust Guidance that stated that such agreements would be treated as “naked” agreements where horizontal competitors agreed to anticompetitive activities, and therefore will be treated as per se illegal under the criminal antitrust laws. Previously, nonsolicitation agreements were investigated by the government as civil violations, and were targeting industries such as technology where knowledgeable workers were scarce. The antitrust analysis treats such agreements as the allocation of labor, just like the prohibited allocation of customers between competitors, which harms workers by reducing competition for their services. The per se treatment of agreements between competitors not to solicit or hire the other’s workers would not apply only in special situations like a joint venture, proposed merger or acquisition, where pro-competitive results could be achieved

Are Commonly Used No-Poach Agreements Unenforceable?