No poaching agreements, also known as no-hire agreements, are agreements between two or more companies not to recruit or hire each other`s employees. These agreements have come under scrutiny in recent years, as the Department of Justice (DOJ) has been cracking down on them under antitrust laws. But when are no poaching agreements legal?
First, it is important to understand why no poaching agreements have become a legal issue. The DOJ has argued that these agreements reduce competition in the job market, limit employee mobility and suppress wages. This goes against the spirit of antitrust laws, which are designed to promote competition and prevent anti-competitive behavior.
In 2016, the DOJ issued guidance stating that no poaching agreements are illegal unless they are „reasonably necessary” to a larger, legitimate collaboration. This means that such agreements are permissible if they are tied to a larger, pro-competitive agreement, such as a joint venture or merger. In these cases, the no poaching agreement may be necessary to protect the interests of both parties.
For example, if two companies are planning to merge, they may agree not to poach each other`s employees to ensure a smooth transition and avoid disruption to their businesses. This type of no poaching agreement is more likely to be deemed legal as it is tied to a larger, legitimate collaboration.
However, no poaching agreements that are not tied to a larger collaboration are more likely to be viewed as illegal. For instance, if two companies in the same industry agree not to hire each other`s employees, it is more likely that the DOJ will view it as an anti-competitive practice that harms employee mobility and wage growth.
Companies should be aware that violating antitrust laws can result in severe financial penalties and damage to their reputation. It is important for companies to consult with legal counsel before entering into any no poaching agreements, especially those that are not tied to a larger, legitimate collaboration.
In summary, no poaching agreements can be legal if they are tied to a larger, legitimate collaboration and deemed reasonably necessary. However, no poaching agreements that are not tied to a larger collaboration are more likely to be viewed as anti-competitive and illegal. Companies should consult with legal counsel to ensure that any no poaching agreements they enter into are compliant with antitrust laws.