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As noted in a recent Corporate Counsel article and in my previous blog post, in the wake of hundred-million dollar class action settlements by Google, Apple, eBay, Intel and Adobe (collectively, "Defendants"), employers should beware that bilateral agreement with competitors not to attempt to hire competitors' employees can present potential antitrust concerns.  The class action plaintiffs in the California district court action alleged that Defendants entered into several bilateral agreements with each other not to "cold call" each other's employees.  The class action plaintiffs maintained that these agreements formed an overarching conspiracy that suppressed wages for all Defendants' employees in violation of Section One of the Sherman Antitrust Act and Section Four of the Clayton Antitrust Act.

 

Dale Grimes, an antitrust lawyer quoted in the Corporate Counsel article, notes: "Although the tech leaders knew their actions were  questionable, it’s plausible the companies involved weren’t thinking much about  these specific antitrust consequences. Companies tend to worry about  other types of antitrust violations such as price fixing, not talent recruitment  practices."  So what should companies keep in mind to avoid running afoul of antitrust laws in their hiring practices?  At least on the antitrust side, it appears it’s best to keep any recruitment and  employment agreements within the bounds of a single company. "The dividing line  between what's going to be genuinely legal and what’s going to be illegal is  whether the company does it unilaterally or whether they do it with a  competitor," Grimes said.

 

As is true with all communications between and about competitors, companies should not say anything in an email that might raise eyebrows later -- and constitute circumstantial evidence of a conspiracy.  In the California case, plaintiffs used an internal e-mail from Google Chairman Eric Schmidt instructing one of his employees to share a do-not-hire list verbally because "I don't want to create a paper trail over which we can be sued later" as a key piece of evidence to survive summary judgment.

 

Companies should consult with antitrust counsel to ensure that they take steps to protect themselves in ways that do not create antitrust issues.  For example, companies concerned with the dissemination of trade secrets in the event that a key employee subsequently goes to work for a competitor may wish to consider using non-compete clauses in employee agreements to protect themselves.  However, companies should keep in mind that different states have different laws regarding non-competes, with some states like California construing them extremely narrowly.  As always, the best way to avoid litigation is to proactively address any potential issues before taking action that could cause significant financial and reputational costs down the road.

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