The DOJ’s recent enforcement campaign against no-poach agreements began when it brought a series of cases against a number of high-profile, technology companies, because of agreements between the companies not to cold call each other’s employees, and in some cases, agreements not to hire each other’s employees. These cases ultimately resulted in consent judgments. Then, in October 2016, the DOJ and the FTC issued their first “Antitrust Guidance for Human Resource Professionals” in which they, among other things, warned employers that “naked” no-poach agreements (that is, agreements that are not reasonably necessary for a separate legitimate business transaction or collaboration) were considered per se illegal under federal antitrust laws and that, going forward, the DOJ might seek criminal penalties against companies that enter into such agreements.1
Since then, the DOJ brought a civil antitrust lawsuit challenging a no-poach agreement as per se unlawful, which resulted in entry of a consent judgment; however, to date, the DOJ has not filed criminal charges challenging any no-poach agreement, in that action or otherwise.
Several states have followed the DOJ’s lead and launched their own investigations and, in some cases, challenges to the lawfulness of no-poach agreements, particularly in the franchisor-franchisee context. The Washington State Attorney General has been particularly active in this arena, and in October 2018, it filed a lawsuit against restaurant chain Jersey Mike’s, which had refused to remove a no-poach clause from its franchise agreements. The court recently denied a motion to dismiss filed by Jersey Mike’s, allowing the case to proceed.
In addition, private plaintiffs have commenced a flurry of civil class action antitrust litigation against franchisors related to the use of no-poach provisions, and to date, these actions have survived dismissal at the early stages of the proceedings. See, e.g., Arrington v. Burger King Worldwide, Inc., et al., No. 1:18-cv-24128 (S.D. Fla.); Butler v. Jimmy John’s Franchise, LLC, 331 F. Supp. 3d 786 (S.D. Ill. 2018). In those cases, the courts have focused on identifying the appropriate standard (per se, rule of reason, or quick look) to be applied in determining whether the allegations were sufficient to survive a motion to dismiss.