Anti-"Corporate Raiding" Agreements Present Their Own Concerns

07 October 2013 Labor & Employment Law Perspectives Blog

Facing stiff competition for talent and a mobile work force, several technology companies located in Silicon Valley allegedly made a pact not to recruit each other’s employees including agreeing not to “cold call” employees. This led to an investigation by the U.S. Department of Justice in which it concluded that the anti-poaching agreement violated antitrust law resulting in depressed wages and limiting job opportunities for software engineers. During the investigation, emails from top executives at these firms supported the conclusion that there was a “gentlemen’s agreement” to restrict recruiting. The companies settled the lawsuit brought by the DOJ by agreeing not to enter into similar agreements in the future.

Not surprisingly, the settlement sparked a class action complaint in California against several technology giants alleging similar anti-competitive activities, which had the alleged effect of suppressing wages and opportunities. After losing an initial class certification motion and thereafter narrowing the class to “technical workers,” the Plaintiffs’ attorneys reported to the court that three of those companies had agreed to pay a total of $20 million to resolve the case. At least four tech firms continue to fight, arguing that there was no conspiracy and that the case was not appropriate for class treatment.

Does this new focus suggest that companies should carte blanche to poach their competitors’ employees? The answer is no, and indeed, neither the DOJ action nor the class action lawsuit validate improper corporate raiding activities. While bringing such claims can be challenging, there are a variety of legal theories available if a poaching employer uses improper methods or acts with an illegitimate motive in a corporate raiding campaign.

The DOJ settlement and class action case also do not suggest that as an absolute principle, companies cannot agree not to solicit, or even hire, a competitor’s employees as part of the resolution of a lawsuit. In its Competitive Impact Statement, the DOJ expressly stated that appropriately tailored non-solicitation provisions reasonably necessary for “the settlement or compromise of legal disputes” were not prohibited.  Moreover, a non-solicitation agreement between two companies limited to resolving specific dispute is unlikely to result in the broad anti-competitive effect necessary to implicate anti-trust laws.

What these matters do clearly suggest is that where companies are considering any type of formal or informal agreement to not recruit or hire each other’s employees – even in connection with potential resolution of a corporate raiding case – close analysis is required.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services