Tuesday, April 24, 2012

Non-poaching provisions

A lawsuit has been brought against Apple, Google and several other San Francisco area technology firms alleging they colluded to avoid hiring employees of the other companies and the net result was to thwart competition for those employees thereby artificially keeping their salaries down. It is argued that each maintained a "blacklist" of companies they couldn't hire from which would be a form of restraint to movement of employees. I thought this would be it a good time to discuss “non-poaching” clauses.

Non-poaching clauses are common in many service related contracts and with temporary labor agreements. In “poaching” you are hiring an employee of a company that you do business. Non-poaching clauses are legal and my opinion is this case will have no effect on "poaching clauses" in contracts. In a poaching situation the companies agree that they will not recruit each other’s employees. It does not prevent individuals from pursuing employment on their own with the other company.

In many of these section you may have

1.Agreement that both parties will not recruit any individual that worked as part of the contracted activity.
2.A period of time in which the recruitment is prohibited.
3.Either an outright restriction against hiring the individuals during that period or a specified damage to be paid if the employee solicited work on their own is independently hired without any recruitment.

The narrower the non-poaching definition, the less likely there would be any problems from such a clause. For example restricting the hiring of all employees of a company may be more problematic than limiting it to only those employees that worked as part of that contracted activity. With that narrower definition it’s much easier to manage and would be less expensive, as damages would only apply to hiring of those specific individuals.

In the Apple, Google situation the facts are different. There probably was no written agreement. The restriction (if they existed) did not apply to specific individuals that performed work for the other company. The argument is that they applied to all employees of the other firms. Instead of the worker being able to seek work at any company other than the one they had previously done work for, the argument in the case was this group of companies were by their agreement deliberately not hiring individuals from these other companies to prevent each other from poaching the other companies employees. The argument is the restriction (if it existed) constituted a restraint of trade artificially keeping the employees salaries low.

Courts will enforce what the parties agreed as long as it isn't illegal. Standard non-poaching provisions have been held to be legal. The courts will look at the circumstance and facts in the lawsuit against Apple, Google and others to determine if there was a conspiracy and whether the conduct was legal.

No comments:

Post a Comment