When companies are accused of restraint of trade you usually think of things such as price fixing or other acts of collusion that restrict the competitive nature of doing business. In the last couple of years, however, more and more cases have been brought in situations where employees have complained that their ability to get work has been restricted by “no-poaching” agreements between companies. The Department of Justice and Congressional representatives have taken up their case and are working in both the courts and in Congress to keep companies from entering into these agreements or abiding by them. Beyond the legal ramifications, I wonder if this will also have an effect on the gig economy?
What is a no-poaching agreement?
Generally, no-poaching agreements are agreements between companies not to recruit employees from each other. These could be competitors who work in a generally small arena with a limited number of employees; or where competitors have agreed to restrict wages in their industry; or franchisees who have the same business model recruiting already trained employees from another franchisee; or lastly, enforcing very restrictive noncompetes signed by employees. All of these types of agreements or actions are deemed by the DOJ to be restraints to the ability of employees to find meaningful work. Two senators, Senator Cory Booker and Senator Elizabeth Warren, have also entered the discussion by proposing legislation to restrict these types of actions or agreements. This effort was started in the last years of the Obama administration, but the current DOJ seems inclined to continue. Three attornies from the firm Pepper Hamilton LLP, also point out in their article, No-Poach Agreements Targeted by Plaintiffs, Enforcement Agencies, and Senators, that plaintiffs are also targeting these agreements.
The general premise of these actions is that these agreements restrict and restrain trade in the sense that employees are restricted from pursuing their ability to improve their position in life by getting a better paying job in the same field. It is akin to companies restricting competitive pricing, aka price fixing, that harms the consumer. I wonder, however, if this also has something to do with a rise in the mindset of the gig economy. Workers, millennial workers, in particular, don’t want restrictions put on their ability to get work or to earn a paycheck, regardless of the source. Having their ability to move from one company to another restricted by an agreement not recruit from a competitor, written or otherwise, is seen as not in the spirit of the new economy. It is certainly seen as not fair to the worker. This might be the first step in a much freer job marketplace that will fit with the developing mindset of who controls work. I guess time will tell.
If you would like to read the well thought out legal description of what is happening in this arena click on the link above. It is an excellent piece and very informative.