California Labor &
Employment Law Blog

Oct. 15 2010

New Attack on Non-Solicitation Agreements

Topics: Employee Hiring, Discipline & Termination, Legal Information

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.

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For over 20 years, CDF has distinguished itself as one of the top employment, labor and immigration firms in California, representing employers in single-plaintiff and class action lawsuits and advising employers on related legal compliance and risk avoidance. We cover the state, with five locations from Sacramento to San Diego.

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About the Editor

Robin Largent has a regular presence in California state and federal courts and has been lead defense counsel and appellate counsel for large and small California employers in litigation (and arbitration) ranging from individual discrimination and harassment claims to complex wage and hour representative and class actions. She also leads the firm’s appellate practice, having substantial experience and success handling appeals, writ petitions, and amicus briefs in both state and federal court on issues such as class certification (particularly in the wage and hour arena), manageability and due process concerns associated with class action trials, exempt/non-exempt misclassification issues, meal and rest break compliance, trade secret/unfair competition matters, and the scope of federal court jurisdiction under the Class Action Fairness Act.
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