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Employee “No-Poach” Agreements Draw Antitrust Attention and Debate
15 March 2019
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While the DOJ has made clear that hiring restrictions—so-called “no-poach” and wage-fixing agreements—between entities competing for the same employees are
illegal and subject to criminal penalties unless they are ancillary to and necessary for some other legitimate agreement, the legality of hiring restrictions in other contexts is hotly debated.
The DOJ and the Washington State AG submitted dueling amicus briefs this month proposing the legal standard for no-poach provisions in franchise agreements. The DOJ has taken the position that such restrictions typically are subject to the rule of reason; the Washington AG has argued that franchisors should bear a “heavy burden” to show that they are justified. We believe that the DOJ’s approach is correct, but the courts will have the final word.
Under federal law, a hiring restriction may be lawful if it either is between (a) employers that do not compete with each other for employees; or (b) competitors for employees, but that restriction is ancillary to and necessary for a separate, legitimate venture between the competitors, such as a joint venture or merger. An open issue is the legality of a hiring restriction between franchisees and a franchisor that also owns and operates stores.
Antitrust & Competition
Daniel M. Abuhoff
Gary W. Kubek
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