“No Poach Approach”? Hostility Toward No-Hiring Provisions Continues To Grow

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“No Poach Approach”? Hostility Toward No-Hiring Provisions Continues To Grow

5/26/21

Businesses should be wary of entering anti-poaching provisions with their competitors.

If there wasn’t enough evidence that these provisions create legal risk, a Pennsylvania Supreme Court decision at the end of April should finally pique the concern of business competitors who have entered into agreements not to hire or solicit each other’s employees as part of mergers, acquisitions, or franchise and sales relationships.

Plaintiffs’ attorneys representing employees and the Department of Justice had already given fair warning in the last few years that they considered no-poach agreements per se, unreasonable restraints of trade in violation of the Sherman Act that can result in both civil and criminal antitrust liability.[1]

But the Pennsylvania Supreme Court’s decision advances this theory into state law governing restrictive covenants. In Pittsburgh Logistics Sys. V. Beemac Trucking, LLC,[2] it held that a no-hire provision between competitors was void in violation of public policy and unenforceable.

The Beemac opinion discussed several other state court opinions reaching the same result. And given the judicial hostility to restrictive covenants in general, it would not be surprising to see other courts take up the concern motivating the Pennsylvania Supreme Court, the DOJ, and Plaintiffs’ attorneys—that anti-poaching provisions are oppressive to the employees because they typically have no knowledge of them and do not sign them.

With such weigh against anti-poaching provisions, businesses will need to consider whether their value is worth the risk.

For more information, please contact Justin Boron at jboron@fmglaw.com.

[1] In re Ry. Indus. Emple. No-Poach Antitrust Litig., 395 F. Supp. 3d 464, 481-82 (W.D. Pa. 2019); In re Papa John’s Emple. & Franchisee Emple. Antitrust Litig., No. 3:18-CV-00825-JHM, 2019 U.S. Dist. LEXIS 181298, at *9 (W.D. Ky. Oct. 21, 2019)

[2] No. 31 WAP 2019, 2021 Pa. LEXIS 1853 (Apr. 29, 2021)

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