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Lessons Learned: The DOJ's Crackdown on Hiring Practices

By Danielle Alexis Clarkson and Ben Mitchell
October 26, 2009

Over the past several months, the Department of Justice (DOJ) has begun investigating several leading technology companies for possible violations of the antitrust laws. One focus of the DOJ's multi-faceted investigation is whether certain companies have violated antitrust laws by agreeing among themselves not to recruit one another's employees. As has been reported by several news sources, Silicon Valley companies are alleged to have “gentleman's understandings” that actively recruiting a competitor's employees is off-limits. Critics of such agreements claim that they stifle competition for employees by restricting free movement in the job market, thereby suppressing employee wages. On the other hand, the limited use of narrowly drafted no-hire agreements may be reasonable restraints originating from the settlement of legitimate disputes over the misappropriation of intellectual property by poaching a competitor's employees.

While a company's independent decision not to recruit from a competitor isn't likely to constitute a violation of antitrust laws, when two or more companies actively agree not to pursue each others' employees, the antitrust laws need to be considered. The DOJ has argued that where employers covenant not to poach a competitor's employees, such agreements may enable a company to monopolize a market in violation of Section 2 of the Sherman Act or, by harming a competitor's ability to hire the most qualified candidates, create an unreasonable restraint of trade in violation of Section 1. Although the DOJ investigation is currently focused on the technology industry, where intellectual property disputes are frequently litigated, the DOJ may expand its scrutiny to other industries. Therefore, in-house counsel in all areas of the economy should take time to examine and revise employee hiring and retention policies to avoid running afoul of antitrust laws.

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