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No poaching

John Cassels
28/03/2014

Locations

United Kingdom

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.

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 us.

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