Repeat After Me: Competitors Cannot Agree Not to Hire Each Others Employees

by Lee Gesmer on November 29, 2012

Employee non-compete agreements are unenforceable under California statutory law, but that hasn’t stopped many California tech companies from finding a back-room work-around.

In October 2010 I wrote a short post discussing the FTC’s complaint that a number of California companies had illegally agreed not to solicit each others employees – so-called “no-poach” agreements.  (Apple, Google, Have You No Shame? Really!).

Now, two years later, the DOJ has filed a suit against eBay which, the suit claims, entered into a no recruit/no hire agreement with Intuit. Intuit is one of the companies caught engaging in this practice in 2010, and is subject to an agreement not to do so. To make matters even worse, according to the DOJ press release the agreement was entered into at the highest levels of both companies – Meg Whitman (then eBay’s CEO) and Scott Cook (CEO of Intuit).

These companies have huge in-house legal departments (not to mention Big Law outside counsel).  But, the fact that the Justice Department views these types of agreements as per se illegal seems to have escaped them. Or, perhaps the benefit of these agreements (if a company is caught) is worth the cost.

 

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