California Assists New York Employees in No-Poach Case

Topics: Court Decisions, Employee Hiring, Discipline & Termination, Non-Compete and Trade Secrets

A private class-action complaint claimed that the department store, Saks, and several luxury brands (including Louis Vuitton, Loro Piana, Prada, Brunello and Fendi) violated Federal Antitrust laws when they agreed that each of the luxury brand defendants would not hire or solicit to hire Saks’s employees within the six months after the employees left employment at Saks without written approval from Saks. Hayes v. Saks Incorporated, et al., USDC ED NY No. 1:20-cv-00833. The agreements were reached through negotiations between the department store and the luxury brands for the placement and sale of the luxury brands’ goods in Saks department stores.
The trial court granted defendants’ Motions to Dismiss and concluded that the complaint failed to allege an unreasonable restraint of trade and that any alleged restraint was ancillary to a legitimate collaborative business purpose.

The plaintiffs appealed the dismissal on several grounds. California and 20 other states filed an Amicus Curiae brief supporting plaintiffs’ appeal asserting that each state “has a keen interest in preventing such anticompetitive harms to labor markets and to workers….” Further, California and the other states asserted that the trial court’s refusal to recognize that the no-hire agreements were per se illegal which threatened each state’s ability to protect their own labor markets from unfair trade practices. California and its ally states asserted that the no-hire agreements constituted illegal anti-competitive no-poach agreements with the effect of depressing wages, benefit packages and limiting employee mobility. The Department of Justice, too, filed an Amicus Curiae brief supporting the workers. 

While the legal issues on appeal remain under review, all employers should be aware that California, the Department of Justice and many other states continue to bring, monitor and police antitrust claims based on no-poach agreements and, typically side with employees making such claims. Before your company enters into an agreement with any other business restricting employees’ mobility of employment, consult with the author of this blog or your favorite CDF attorney to limit or eliminate potential antitrust exposure.