In an April 3, 2018, announcement, the US Department of Justice (DOJ) indicated that it had reached a settlement with two of the world’s largest rail equipment suppliers, Knorr-Bremse AG and Westinghouse Air Brake Technologies Corporation, in a lawsuit alleging that the companies had maintained unlawful agreements not to compare for each other’s employees. The DOJ stated that the “no-poach” agreements at issue essentially restrained competition for rail industry workers in violation of US antitrust laws. The lawsuit and settlement confirmed the DOJ’s position, detailed in its joint statement with the Federal Trade Commission, that agreements not to recruit certain employees or not to compete on terms of compensation can be illegal.
At issue in this case was whether the companies’ agreements not to solicit or hire another’s employees were reasonable and “ancillary to a legitimate business collaboration.” The proposed final judgment filed as part of the April 3 settlement explains that a legal agreement would be in writing and signed by all parties thereto, specifically identify the collaboration to which the agreement is ancillary, be narrowly tailored to affect only employees directly involved in the agreement, identify with specificity such employees, and contain a specific termination date or event.
If you or your company are considering entering into a no-poach agreement with another business, you should consider meeting with your Ally Law employment or antitrust lawyers to ensure that your proposed agreement does not violate guidance provided by the DOJ and FTC. While such agreements can be beneficial for clearly defined, legitimate business collaborations, you will want to limit potential exposure to antitrust enforcement actions.