In Hayes v. Saks Incorporation, et al., a private class-action brought in New York, the plaintiffs have 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 employee left employment at Saks without written approval from Saks. 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 (friend of the court) brief supporting plaintiffs’ appeal asserting that each state “has a keen interest in preventing such anticompetitive harms to labor markets and to workers….”

California and the other states also have asserted that the trial court’s refusal to recognize that the no-hire agreements were per se illegal threatened the states’ ability to protect their own labor markets from unfair trade practices. California and its allies contend that the no-hire agreements constitute an illegal anti-competitive no-poach agreement with the effect of depressing wages, benefit packages and limiting employee mobility. The Department of Justice also filed an
Amicus Curiae brief supporting the workers.

Although the legal issues on appeal remain under review, employers should be cognizant 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 in employment, consult with a qualified business attorney to ensure that the provision is necessary and has the best chance of being determined to be enforceable.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

The United States Department of Justice (DOJ) is criminally prosecuting “no-poach” agreements between two or more employers that agree not to hire employees away from each other.

The DOJ’s first criminal prosecution of no-poach agreements led to a Texas federal grand jury indictment of Surgical Care Affiliates LLC (SCA), a unit of UnitedHealth Group, for allegedly entering into agreements with two other healthcare companies to not poach each other’s senior-level employees. DOJ’s criminal pursuit of no-poach agreements is not a surprise. It has been the DOJ’s position for years that no-poach agreements are illegal. Future enforcement actions are expected since the present administration has signaled support for elimination of non-compete restrictions.

In at 2016 joint guidance by the DOJ and Federal Trade Commission (FTC), corporations and HR professionals were warned about the application of federal antitrust laws to hiring practices and non-poach agreements. The agencies advised the DOJ intended to “proceed criminally against naked-fixing or no-poaching agreements.” The DOJ reaffirmed its intention to criminally prosecute no-poach and at the end of 2020 when it commenced the first criminal prosecution targeting a staffing company for entering into wage-fixing agreements with its competitors. The former owner of the company could face up to 10 years in prison and a $1 million fine, in addition to potential FTC penalties and fines. A violation of the Sherman Act (anti-trust law) carries a maximum penalty of $100 million for corporations.

Employers who are approached by competitors or collaborators about no-poach agreements or agreements to pay the same wages or salaries should immediately consult with legal counsel. Employers that have entered into agreements resembling a no-poach agreement should also consult with counsel to extricate themselves from such arrangements.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.