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Competition Law

Analysis - debate - current awareness

28 MAR 2014

No poaching

In 2010, the US Department of Justice settled an investigation it had been conducting into non-solicitation agreements involving a number of Silicon Valley tech companies.

The DOJ had been investigating a variety of interlocking agreements between six companies (Adobe, Apple, Google, Intel, Induit, and Pixar) that prohibited them from soliciting one another's employees and which the DOJ said "eliminated a significant form of competition to attract highly skilled employees."  The case settled on the basis that the companies would terminate any such non-solicitation arrangements.

More than 60,000 tech workers are now reported to be suing these companies, and a number of others. The tech workers claim that there was an overarching conspiracy to enter into illegal agreements not to hire each others' employees: a no poaching cartel.  It is reported that Facebook declined to take part in the anti-poaching agreements. The trial is scheduled to begin in May.

In the EU, non-solicitation agreements of the sort alleged to have been put in place in Silicon Valley, would breach anti-trust rules.  Such restrictions are generally only permissible where they are objectively justified in protecting legitimate commercial interests: for example, in the context of a business acquisition to ensure that the acquiring party is not denuded of key staff by the business vendor.

In that context, non-competition provisions (including non-solicitation clauses) should, save in exceptional circumstances, be limited as follows:

  • where goodwill only (customer relationships and customer loyalty) is being protected, they must persist for not more than two years;
  • where goodwill and technical know-how is being protected, they must persist for not more than three years.

If you would like to discuss these issues, please do not hesitate to contact John Cassels at john.cassels@ffw.com


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