Antitrust Scrutiny of Agreements Not to Compete For Employees

Employers and Human Resource personnel need a crash course in the antitrust laws and an understanding of the antitrust risks of entering into no-poach agreements.

What is a no-poach agreement? 

A no-poach agreement is essentially an agreement between two companies not to compete for each other’s employees, such as by not soliciting or hiring them. No-poach agreements, or agreements not to approach other companies’ employees to hire, are generally considered illegal under the antitrust laws.  When companies make agreements not to compete for each other’s employees, they are restraining commerce because they are not allowing working people to freely change jobs to potentially make more money or move to another location if they wish to. It is illegal for companies or other entities to make these agreements, but it happens more often than you would think – just like the case with Seaman v. Duke University.

 What happened in Seaman v. Duke University?

Dr. Seaman is an assistant professor at Duke University’s (Duke) medical school. Duke made an anti-poaching agreement with its competitor, the University of North Carolina (UNC). Dr. Seaman and others, who were faculty at Duke and UNC medical schools, filed a class action lawsuit against Duke claiming that Duke violated the Sherman Act when it entered into the agreement to “prevent lateral hiring of certain medical employees in order to eliminate competition and suppress compensation.” See Seaman v. Duke University and Duke University Health System, Case No. 1:15-cv-000462-CCE-JLW (M.D.N.C.).

In March, the Department of Justice (DOJ) got involved in the case by filing a Statement of Interest. This allowed the DOJ to intervene to influence and actually enforce an outcome that prevents anti-poaching agreements in the future.

In the end, the parties settled the case. In the settlement agreement, it was decided that Duke would pay Dr. Seaman and faculty members $54,500,000, along with attorney’s fees, reimbursement for costs, and a service award. What is interesting is that the federal district court in North Carolina presiding over the case went a step further and allowed the DOJ to enforce the injunctive relief provisions of the settlement agreement. The injunctive relief provisions of the settlement agreement prohibit Duke from entering into any anti-poaching agreements for five years and require Duke to take steps to ensure this does not happen in the future. Such steps include enacting notification and compliance policies within the University.

Lessons Learned:

The DOJ continues to scrutinize no poaching agreements.  Given the DOJ’s focus on no poach agreements, it has become increasingly important for employers in all industries to learn about the risks of entering into agreements that limit their competition for employees.  In its ability to enforce these provisions, the DOJ will be keeping a close eye on Duke, while simultaneously using Duke as an example to other companies and entities. The DOJ’s goal is to be proactive in enforcing antitrust laws that prohibit these kinds of agreements between employers and to protect the American worker.  The courts and the DOJ are sending clear signals to employers that they are cracking down on anti-poaching agreements.  It is important for employers to make sure they are not making employment contracts that break the law.  Employers need to take anti-poaching agreements seriously.  It is time for employers to sort through and re-examine contracts and make sure they are legal.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com