Author: Molly Donovan
This Episode Is About: Antitrust and Employment
Why: There are employment-related antitrust risks that all in-house lawyers should be aware of.
The Five Bullets: In-house lawyers, if I were you, I would educate your business team about the following antitrust hot spots related to employment issues…
- As in-person industry conferences reconvene, educate the people at your company who deal with employment issues about the risks of discussing hiring, recruiting, soliciting and other employment-related matters (compensation, benefits). Such discussions can be dangerous even though your counterpart does not make the same product or supply the same service as you. The key is whether you and the counterpart compete for LABOR. If you do, steer clear of discussions that create even the appearance of collusion.
- When working with another company on a legitimate project—say a vendor-vendee relationship—be cautious about reaching even ancillary agreements that restrict competition for labor. In the right circumstances, these types of agreements are defensible, but companies need to put some thought into whether and why they are necessary rather than agreeing to them routinely as a matter of course. Agreements that restrict competition for labor should be narrowly tailored to satisfy a specific procompetitive justification that is relevant and important. What will be considered an adequate procompetitive justification is a case-by-case question, but antitrust counsel is equipped to help craft these agreements to minimize the risks.
- Watch for anticompetitive agreements relating to labor that are proposed in the context of corporate transactions. Here’s an example: Company A is getting sold. In the initial phases of the sale, there may be lots of suitors that will inquire or bid. All suitors sign a broad agreement that they won’t poach Company A’s employees and won’t poach Company A’s customers. This type of agreement – if tailored properly – might make sense in later phases of the transaction, but for a single transaction, it’s not a good idea to have multiple no-poach agreements in play that are unnecessary given the factual context.
- Agreements between a company and its own employees that the employees aren’t going to compete with the company upon leaving the company’s employment call for antitrust scrutiny. These agreements shouldn’t cover lots of people, a lengthy time-period, or lots of geography unnecessarily. Be particularly vigilant when non-competes are used against lower-level employees unlikely to possess proprietary information. Two tips: use non-competes sparingly when necessary to meet a procompetitive justification that is relevant to the employees at issue. Fairness counts: keep these agreements visible—not buried in the fine print—and easy for the employees who will be signing them to understand.
- It is a MYTH that only very large companies are subject to investigation for no poach and other anticompetitive agreements involving employment. Relatively small companies are also embroiled in investigations and litigations in this area.