Agreements Not To Solicit Employees From Other Employers

In addition to California’s public policy in favor of competition, California employers should be aware that agreements with other employers not to contact or hire each others respective employees might constitute a Federal Antitrust violation.  The United States’ Department of Justice Antitrust Division, in conjunction with an ongoing investigation of anticompetitive practices of high tech employers, recently filed a Complaint against and simultaneously announced a settlement with Adobe Systems Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc. and Pixar along those lines.

According to the complaint, the companies engaged in a practice of agreeing not to “cold call” employees of the other company to entice them to leave current employment.  The complaint states that the agreements were formed and actively managed by senior executives of the companies and were not limited by geography, job function, product group or time period.  Thus, the companies’ actions allegedly reduced the ability of employees to compete for high tech positions and interfered with the proper functioning of the price-setting mechanism that otherwise would have prevailed in competition among the employers. In other words, a lack of competition hurt affected employees who were deprived of competitive employment information and access to better job opportunities.

The proposed settlement, which if accepted by the court, broadly prohibits the companies from entering, maintaining or enforcing any agreement that prevents any person from soliciting, cold calling, recruiting, or otherwise competing for employees.  The companies also have agreed to implement compliance measures tailored to these practices.

The proposed settlement, along with the department’s competitive impact statement, will be published in The Federal Register and, following a 60-day comment period, the court is expected to conclude that the settlement serves the public interest, approve the agreement and enter a final judgment disposing of the case.

Therefore, California employers should be cautious about entering into casual or formal agreements with competitors that would limit each business’ ability to solicit employees away from the competition as such agreements will likely bring scrutiny from the Justice Department’s Antitrust Division.