Employees are more likely to explore new employment options as the end of the year draws near. But, employee mobility can be hindered by non-solicit, non-hire and confidentiality agreements. In addition, a recent trend in litigation has focused on alleged poaching of at-will employees and assertions that employee compensation information is a business trade secret.
However, employees now have new leverage to leave and recruit their former coworkers, because several states, cities and even the Department of Justice (DOJ) are pushing back against the recent litigation trends limiting employee mobility. Recent legislation and DOJ actions are providing individuals more freedom of job choice, along with open access to compensation information, which is good news for employees.
However, how do companies manage the push for greater employee mobility?
The job search company Indeed recently included pay transparency laws as one of its “Ideas that will change the world in 2022.” Pay transparency laws require that some level of compensation information be listed on job postings or job advertisements. California, Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington to name a few, all require job postings to include compensation information. The New York legislature has also passed similar pay transparency legislation that has yet to be signed by the governor. And, as this week’s companion article discusses, New York City’s pay transparency law went into effect just last week. Some of these laws provide for private causes of actions that employees can bring against employers. The pay publication is meant to eliminate pay discrepancies, but one of effect of these measures is to abolish legal arguments that employee compensation information is a company trade secret.
In 2016, the DOJ and Federal Trade Commission (FTC) issued guidelines for HR professionals on how to avoid potential violations of antitrust laws related to the use of no-poach agreements. The DOJ was slow to focus on anti-poaching claims, but recently has increased activity in this area. The focus on these non-poach agreements and other activities limiting employee mobility has increased under the Biden administration.
President Biden issued an Executive Order on Promoting Competition in the American Economy in July 2021 with the stated intention to increase employee mobility. Then in July 2022, the National Labor Relations Board and the Department of Justice announced their plans to jointly focus on worker protection and mobility.
The DOJ actions described above come in the context of a recent uptick in lawsuits alleging a competitor has improperly poached at-will employees. This development indicates that companies may be looking for new ways to retain employees and fend off competitors from draining their workforce. The typical no-poaching lawsuit involves a group of at-will employees leaving a company and forming a competitor. The former employer will claim the at-will employees violated fiduciary duties by forming a competitor and recruiting employees while employed. On the other hand, employees claim they have a right to form another company and leave to compete as long as they do not have restrictive covenants restricting competition. As one example of this activity, McDonalds was recently sued by employees claiming the franchise agreements containing no-hire agreements were anticompetitive.
With a tight workforce and the risks associated with no-hire agreements, what can a company do now to legally maintain its workforce?
Foley will continue to monitor the changing landscape of employee mobility and the government’s enforcement of recent initiatives. In the meantime, companies should take steps to increase flexibility, define culture and revise policies and agreements in an effort to maintain its workforce.