Non-Hire Agreements As Antitrust Violations

Can a business agree with a competitor not to recruit each other’s employees without running afoul of the Sherman Act? Like many answers in the restrictive covenant field, it depends. As several of our nation’s leading high tech companies recently learned, a business better have a demonstrable legitimate business reason for agreeing with its competitor not to recruit each other’s employees or the Department of Justice may bring suit.

On Sept. 24, 2010, the Department of Justice initiated a lawsuit in the U.S. District Court for the District of Columbia, titled United States of America v. Adobe Systems Inc., et al., Civil Case No. 1:10-CV-01629. The Justice Department filed a complaint against Adobe Systems Inc. (Adobe), Apple Inc. (Apple), Google Inc. (Google), Intel Corporation (Intel), Intuit Inc. (Intuit) and Pixar, alleging that those companies entered into various bilateral agreements in which they agreed not to actively solicit each other’s highly skilled technical employees, and that those agreements violated Section 1 of the Sherman Act, 15 U.S.C. §1. According to the complaint, at various times beginning in the period from 2005 to 2007, Apple entered into mutual agreements with Google, Adobe, and Pixar not to cold call each other’s employees, and Google entered into similar agreements with Intel and Intuit. The executives of these companies allegedly “actively managed and enforced the agreement[s] through direct communications.”