Non-solicitation
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THE LATEST: DOJ Distinguishes ‘No-Poach’ Agreements

WHAT HAPPENED: The Department of Justice filed a Statement of Interest in three related cases in the Eastern District of Washington yesterday dealing with alleged “no-poach” (or non-solicitation) agreements between franchisors like Carl’s Jr, Auntie Anne’s and Arby’s and their franchisees. In the statement, the DOJ distinguished between “naked” no-poach agreements between competitors and the kinds of no-poach agreements in the franchise context that are typically vertical restraints between the parent company and the individual franchisee. According to the DOJ, naked no-poach agreements should be analyzed as per se, or presumptively anticompetitive and illegal under Section 1 of the Sherman Act, while most vertical restraints should be analyzed under the rule of reason which requires some balancing of potential harms and benefits. The statement did, however, distinguish two scenarios where franchise agreements could still merit per se In a situation where the...

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THE LATEST: Employee “No-Poaching” Agreements Remain in the Antitrust Crosshairs

There have been a series of investigations, class action suits and high value settlements involving agreements not to solicit employees. In addition, the Department of Justice (DOJ) Antitrust Division made a splash a few months ago when it announced that it would criminally investigate and prosecute employers that engage in certain “naked” no-poach or wage-fixing agreements. WHAT HAPPENED: Employees filed a civil class action against the Carl’s Jr. hamburger chain because of a no-hire provision in its franchisee agreements. The plaintiffs allege that Carl Karcher Enterprises (CKE), the franchisor, includes the no-hire provisions in its standard agreement to prevent its restaurants from hiring each other’s shift leaders. According to the complaint, the clause appears in the same part of the agreement that also prevents franchisees from competing for each other’s customers. WHAT THIS MEANS: The plaintiffs’ bar continues to view employee no-hire/non-solicitation...

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How to (Legally) Keep Competitors from Poaching Your Key Employees: Antitrust Law and Non-Poaching/Non-Solicitation Agreements

by Nick Grimmer How can a company legally protect its valuable interests in key employees, when a competitor can just swoop in with a more attractive employment offer?  A non-poaching agreement or clause (also called a no- or non-poach, -hire, -interference, -switching or -solicitation agreement or clause, depending on the circumstances) can offer protection.  In these agreements, competitors or potential competitors for skilled labor might agree not to cold call, solicit, recruit or even hire each other’s employees.  The agreements usually cover specified employees or categories of employees (e.g., by title, skill area or salary level) and usually last for a set period of time.  The ancillary restraints doctrine generally governs non-poaching agreements.  Under that doctrine, a restraint of trade (here, the non-poaching agreement) is permissible if it is one in which there is also a legitimate/procompetitive main agreement, and...

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